2023
Altria Group, Inc.
Annual Report
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From tobacco company
To tobacco harm reduction company.
Altria Group, Inc. | 6601 W. Broad Street | Richmond, VA 23230-1723 | altria.com
426016_v1 2023 ALTRIA Annual Report v21 030624_R1.indd 1
3/7/24 11:19 PM
n D E A R F E L L O W S H A R E H O L D E R S n
March 20, 2024
2023 was a pivotal year for Altria. We made significant progress in
a PMTA for NJOY’s device with age-gated technology with non-
pursuit of our Vision by enhancing our smoke-free product portfolio,
tobacco flavors in the first half of this year. We also made progress
while our businesses performed well in a challenging environment.
on our heated tobacco product pipeline. We continued regulatory
We continued to deliver strong financial performance and returned
preparations to bring heated tobacco stick products to the U.S.
significant value to our shareholders once again.
market through Horizon, our joint venture with JT Group, and are
Progress Toward Our Vision n In 2023, we remained focused
on Moving Beyond Smoking™. Our teams took several transformative
steps that we believe position us for sustained success in the U.S.
nicotine space, including (i) completing our acquisition of NJOY and
fully integrating it into our family of companies, (ii) accelerating the
growth of our other smoke-free offerings, (iii) continuing to develop a
promising smoke-free product pipeline and (iv) introducing our 2028
Enterprise Goals.
Upon completion of the NJOY acquisition on June 1st, our
teams took several steps to lay the foundation for NJOY’s long
term success. We worked to solidify NJOY’s supply chain and
manufacturing capacity to support our expansion plans. We
strengthened NJOY’s presence at retail and closed existing inventory
gaps. With the help of AGDC, NJOY expanded distribution to over
75,000 stores, and introduced its first trade program to help enhance
on track to file a PMTA for Ploom in the first half of 2025. We also
continued to make progress on the development of our heated
tobacco capsule product, SWIC.
Resilient Traditional Tobacco Businesses n Our traditional
tobacco businesses generated strong performance in 2023.
The smokeable products segment delivered adjusted operating
companies income (OCI) of $10.7 billion and expanded adjusted OCI
margins nearly 1 percentage point to 59.9%.* Marlboro delivered
resilient performance once again with its share of the premium
segment growing to 58.8% for full-year 2023, up 0.6 percentage
points from 2022.
Our oral tobacco products segment delivered adjusted OCI of $1.7
billion, an increase of 5.5% versus the prior year, and increased
adjusted OCI margins to 67.4%.* Copenhagen remained the leading
moist smokeless tobacco brand and on! increased volume and
visibility and improve product fixture space at retail.
profitability.
NJOY consumables shipment volume was approximately 23 million
units since the transaction closed and its retail share improved
sequentially in the fourth quarter. While still early, we are excited by
NJOY’s momentum and remain optimistic about its potential in the
U.S. market.
Strong Financial Performance and Significant Cash Returns to
Shareholders n We grew full-year adjusted diluted earnings per
share by 2.3%,* reflecting a balance between maximizing profitability
in our core businesses while investing for our future. Our tobacco
businesses generated substantial cash flows, and we returned nearly
Helix grew reported shipment volume for on! to 114.3 million cans in
$7.8 billion to shareholders last year through dividends and share
2023, an increase of nearly 40% versus the prior year. on! retail share
repurchases combined. Our Board of Directors raised the dividend
momentum continued as the brand reached 6.8% of the total U.S.
for the 58th time in 54 years, and we completed our $1 billion share
oral tobacco category and 22% of the U.S. nicotine pouch category
repurchase program.
for full-year 2023. Moreover, Helix improved profitability as the retail
price of on! increased over 37% versus the prior year.
Our teams also made significant progress with our product pipeline.
In oral tobacco, we expect to file a PMTA for on! PLUS in the first half
of this year, and upon FDA authorization, we expect it to contribute
meaningfully to Helix’s growth. In August, we launched on! PLUS in
Sweden — one of the largest modern oral nicotine markets in the
Looking Forward n We are excited by the progress made in
2023, and we are committed to achieving long-term leadership
in each of the smoke-free categories while delivering strong
shareholder returns. We believe we are well positioned to achieve our
2028 Enterprise Goals and remain committed to our Vision.
world — with encouraging results. In e-vapor, we expect to submit
Thank you, as always, for your ongoing support of Altria.
Kathryn B. McQuade n Chair of the Board
William F. Gifford, Jr. n Chief Executive Officer
For important factors that may cause actual results to differ materially from those contained in the forward-looking statements included herein, see Item 1A. Risk Factors
in Part I of the enclosed Annual Report on Form 10-K.
* For explanations and reconciliations of adjusted measures to corresponding GAAP financial measures used herein, see Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations in Part II of the enclosed Annual Report on Form 10-K.
13-3260245
13-3260245
13-3260245
13-3260245
13-3260245
(I.R.S. Employer
(I.R.S. Employer
(I.R.S. Employer
Identification No.)
Identification No.)
(I.R.S. Employer
13-3260245
(I.R.S. Employer
Identification No.)
13-3260245
Identification No.)
13-3260245
Identification No.)
23230
23230
13-3260245
23230
(I.R.S. Employer
23230
(I.R.S. Employer
23230
Identification No.)
(I.R.S. Employer
(Zip Code)
13-3260245
(Zip Code)
Identification No.)
(I.R.S. Employer
13-3260245
Identification No.)
(Zip Code)
(Zip Code)
Identification No.)
23230
(Zip Code)
23230
(I.R.S. Employer
23230
(I.R.S. Employer
Identification No.)
23230
(Zip Code)
Identification No.)
(Zip Code)
(Zip Code)
23230
(Zip Code)
23230
(Zip Code)
(Zip Code)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
UNITED STATES
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
UNITED STATES
FORM 10-K
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
Washington, D.C. 20549
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the fiscal year ended December 31, 2023
FORM 10-K
For the fiscal year ended December 31, 2023
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
For the fiscal year ended December 31, 2023
For the fiscal year ended December 31, 2023
Washington, D.C. 20549
Washington, D.C. 20549
OR
For the fiscal year ended December 31, 2023
FORM 10-K
OR
Washington, D.C. 20549
OR
OR
FORM 10-K
OR
FORM 10-K
For the fiscal year ended December 31, 2023
FORM 10-K
For the fiscal year ended December 31, 2023
For the transition period from to
For the transition period from to
OR
For the fiscal year ended December 31, 2023
For the transition period from to
OR
For the transition period from to
For the fiscal year ended December 31, 2023
Commission File Number 1-08940
For the transition period from to
Commission File Number 1-08940
OR
For the fiscal year ended December 31, 2023
Commission File Number 1-08940
Commission File Number 1-08940
For the fiscal year ended December 31, 2023
OR
Commission File Number 1-08940
For the transition period from to
OR
For the transition period from to
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-08940
For the transition period from to
Commission File Number 1-08940
ALTRIA GROUP, INC.
For the transition period from to
ALTRIA GROUP, INC.
ALTRIA GROUP, INC.
Commission File Number 1-08940
ALTRIA GROUP, INC.
For the transition period from to
Commission File Number 1-08940
ALTRIA GROUP, INC.
For the transition period from to
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Commission File Number 1-08940
(Exact name of registrant as specified in its charter)
Commission File Number 1-08940
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
ALTRIA GROUP, INC.
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
ALTRIA GROUP, INC.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Virginia
Virginia
Virginia
Virginia
Virginia
(State or other jurisdiction of
(State or other jurisdiction of
(State or other jurisdiction of
incorporation or organization)
incorporation or organization)
(State or other jurisdiction of
Virginia
(State or other jurisdiction of
incorporation or organization)
Virginia
incorporation or organization)
Virginia
incorporation or organization)
6601 West Broad Street,
6601 West Broad Street,
Virginia
6601 West Broad Street,
(State or other jurisdiction of
6601 West Broad Street,
(State or other jurisdiction of
6601 West Broad Street,
incorporation or organization)
(State or other jurisdiction of
Virginia
incorporation or organization)
(State or other jurisdiction of
Virginia
incorporation or organization)
incorporation or organization)
6601 West Broad Street,
6601 West Broad Street,
(State or other jurisdiction of
6601 West Broad Street,
(State or other jurisdiction of
incorporation or organization)
6601 West Broad Street,
incorporation or organization)
6601 West Broad Street,
6601 West Broad Street,
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
Richmond, Virginia
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
(Address of principal executive offices)
Title of each class
Common Stock, $0.33 1/3 par value
1.700% Notes due 2025
2.200% Notes due 2027
3.125% Notes due 2031
Name of each exchange on which registered
Name of each exchange on which registered
Name of each exchange on which registered
Name of each exchange on which registered
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
804-274-2200
804-274-2200
804-274-2200
804-274-2200
(Registrant’s telephone number, including area code)
804-274-2200
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
804-274-2200
804-274-2200
Securities registered pursuant to Section 12(b) of the Act:
804-274-2200
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
804-274-2200
(Registrant’s telephone number, including area code)
Title of each class
Trading Symbols
Title of each class
Trading Symbols
Title of each class
Trading Symbols
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
(Registrant’s telephone number, including area code)
804-274-2200
Title of each class
Trading Symbols
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbols
Common Stock, $0.33 1/3 par value
MO
804-274-2200
Common Stock, $0.33 1/3 par value
MO
Common Stock, $0.33 1/3 par value
MO
Securities registered pursuant to Section 12(b) of the Act:
(Registrant’s telephone number, including area code)
Common Stock, $0.33 1/3 par value
MO
Trading Symbols
Common Stock, $0.33 1/3 par value
MO
(Registrant’s telephone number, including area code)
1.700% Notes due 2025
MO25
1.700% Notes due 2025
MO25
Title of each class
Trading Symbols
Title of each class
Trading Symbols
1.700% Notes due 2025
MO25
Securities registered pursuant to Section 12(b) of the Act:
1.700% Notes due 2025
MO25
MO
Securities registered pursuant to Section 12(b) of the Act:
1.700% Notes due 2025
MO25
2.200% Notes due 2027
MO27
Title of each class
Trading Symbols
2.200% Notes due 2027
MO27
Common Stock, $0.33 1/3 par value
MO
Common Stock, $0.33 1/3 par value
MO
2.200% Notes due 2027
MO27
2.200% Notes due 2027
MO27
MO25
2.200% Notes due 2027
MO27
3.125% Notes due 2031
MO31
Title of each class
Trading Symbols
Common Stock, $0.33 1/3 par value
MO
3.125% Notes due 2031
MO31
1.700% Notes due 2025
MO25
1.700% Notes due 2025
MO25
Title of each class
Trading Symbols
3.125% Notes due 2031
MO31
MO27
3.125% Notes due 2031
MO31
MO31
3.125% Notes due 2031
Common Stock, $0.33 1/3 par value
MO
1.700% Notes due 2025
MO25
2.200% Notes due 2027
MO27
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
2.200% Notes due 2027
MO27
MO
Common Stock, $0.33 1/3 par value
MO31
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
MO25
1.700% Notes due 2025
2.200% Notes due 2027
MO27
3.125% Notes due 2031
MO31
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
3.125% Notes due 2031
MO31
MO25
1.700% Notes due 2025
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
MO27
2.200% Notes due 2027
3.125% Notes due 2031
MO31
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
MO27
2.200% Notes due 2027
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
3.125% Notes due 2031
MO31
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
MO31
3.125% Notes due 2031
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Securities registered pursuant to Section 12(g) of the Act: None
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days þ Yes ¨ No
requirements for the past 90 days þ Yes ¨ No
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
requirements for the past 90 days þ Yes ¨ No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No
requirements for the past 90 days þ Yes ¨ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
requirements for the past 90 days þ Yes ¨ No
requirements for the past 90 days þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
requirements for the past 90 days þ Yes ¨ No
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
requirements for the past 90 days þ Yes ¨ No
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
files) þ Yes ¨ No
files) þ Yes ¨ No
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
requirements for the past 90 days þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
files) þ Yes ¨ No
files) þ Yes ¨ No
files) þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
files) þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
requirements for the past 90 days þ Yes ¨ No
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
requirements for the past 90 days þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
files) þ Yes ¨ No
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
files) þ Yes ¨ No
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
company” in Rule 12b-2 of the Exchange Act.
company” in Rule 12b-2 of the Exchange Act.
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
files) þ Yes ¨ No
company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
company” in Rule 12b-2 of the Exchange Act.
company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
company” in Rule 12b-2 of the Exchange Act.
files) þ Yes ¨ No
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
þ
Large accelerated filer
☐
þ
Large accelerated filer
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
files) þ Yes ¨ No
☐
þ
Large accelerated filer
☐
þ
Large accelerated filer
company” in Rule 12b-2 of the Exchange Act.
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
þ
Large accelerated filer
company” in Rule 12b-2 of the Exchange Act.
☐
☐
Non-accelerated filer
☐
☐
Non-accelerated filer
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
☐
☐
Non-accelerated filer
company” in Rule 12b-2 of the Exchange Act.
☐
☐
Non-accelerated filer
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
☐
☐
☐
Non-accelerated filer
þ
Large accelerated filer
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
☐
☐
☐
þ
Large accelerated filer
company” in Rule 12b-2 of the Exchange Act.
☐
☐
☐
company” in Rule 12b-2 of the Exchange Act.
þ
Large accelerated filer
☐
☐
☐
Non-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
☐
☐
Non-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
þ
Large accelerated filer
☐
☐
Non-accelerated filer
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
☐
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
☐
þ
Large accelerated filer
☐
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
☐
☐
Non-accelerated filer
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
☐
☐
Non-accelerated filer
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
☐
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
prepared or issued its audit report. ☑
☐
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
prepared or issued its audit report. ☑
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
prepared or issued its audit report. ☑
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
filing reflect the correction of an error to previously issued financial statements. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
prepared or issued its audit report. ☑
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
filing reflect the correction of an error to previously issued financial statements. ☐
prepared or issued its audit report. ☑
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
prepared or issued its audit report. ☑
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
filing reflect the correction of an error to previously issued financial statements. ☐
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
filing reflect the correction of an error to previously issued financial statements. ☐
prepared or issued its audit report. ☑
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
Class
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
filing reflect the correction of an error to previously issued financial statements. ☐
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
filing reflect the correction of an error to previously issued financial statements. ☐
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Class
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Common Stock, $0.33 1/3 par value
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
Common Stock, $0.33 1/3 par value
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Common Stock, $0.33 1/3 par value
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
DOCUMENTS INCORPORATED BY REFERENCE
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes þ No
DOCUMENTS INCORPORATED BY REFERENCE
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $80 billion
Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
based on the closing sale price of the common stock as reported on the New York Stock Exchange.
Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on
May 16, 2024, to be filed with the U.S. Securities and Exchange Commission on or about April 4, 2024, are incorporated by
May 16, 2024, to be filed with the U.S. Securities and Exchange Commission on or about April 4, 2024, are incorporated by
reference into Part III hereof.
Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on
reference into Part III hereof.
May 16, 2024, to be filed with the U.S. Securities and Exchange Commission on or about April 4, 2024, are incorporated by
reference into Part III hereof.
Accelerated filer
Accelerated filer
Accelerated filer
Accelerated filer
Accelerated filer
Accelerated filer
Smaller reporting company
Smaller reporting company
Smaller reporting company
Smaller reporting company
Smaller reporting company
Smaller reporting company
Accelerated filer
Emerging growth company
Emerging growth company
Emerging growth company
Accelerated filer
Emerging growth company
Emerging growth company
Accelerated filer
Emerging growth company
Smaller reporting company
Smaller reporting company
Accelerated filer
Smaller reporting company
Emerging growth company
Accelerated filer
Emerging growth company
Smaller reporting company
Emerging growth company
Smaller reporting company
Emerging growth company
Emerging growth company
Outstanding at February 15, 2024
Outstanding at February 15, 2024
1,763,461,775 shares
1,763,461,775 shares
Outstanding at February 15, 2024
1,763,461,775 shares
Class
Large accelerated filer
Non-accelerated filer
☐
☐
☐
þ
☐
PART I
PART I
TABLE OF CONTENTS
TABLE OF CONTENTS
Page
Page
1
5
13
13
15
16
16
17
18
18
49
50
103
103
103
103
103
104
104
104
104
105
108
109
1
5
13
13
15
16
16
17
18
18
49
50
103
103
103
103
103
104
104
104
104
105
108
109
Item 1.
Item 1A.
Item 1B.
Item 1.
Item 1A.
Item 1B.
Business
Risk Factors
Business
Risk Factors
Unresolved Staff Comments
Unresolved Staff Comments
Item 1C.
Item 2.
Item 3.
Item 4.
Item 1C.
Item 2.
Item 3.
Item 4.
Cybersecurity
Cybersecurity
Properties
Properties
Legal Proceedings
Legal Proceedings
Mine Safety Disclosures
Mine Safety Disclosures
PART II
PART II
Item 5.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Item 6.
Item 7.
Item 7A.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 8.
Item 9.
Item 9A.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Item 9B.
Item 9C.
Item 9B.
Item 9C.
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
PART III
Item 10.
Item 10.
Directors, Executive Officers and Corporate Governance
Directors, Executive Officers and Corporate Governance
Item 11.
Item 11.
Executive Compensation
Executive Compensation
Item 12.
Item 12.
Item 13.
Item 13.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Item 14.
Principal Accounting Fees and Services
Principal Accounting Fees and Services
PART IV
PART IV
Item 15.
Item 15.
Exhibits and Financial Statement Schedules
Exhibits and Financial Statement Schedules
Item 16.
Item 16.
Form 10-K Summary
Form 10-K Summary
Signatures
Signatures
b
Part I
Item 1. Business.
General Development of Business
When used in this Annual Report on Form 10-K (“Form 10-K”), the terms “Altria,” “we,” “us” and “our” refer to either (i) Altria
Group, Inc. and its consolidated subsidiaries or (ii) Altria Group, Inc. only and not its consolidated subsidiaries, as appropriate in the
context.
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision is to responsibly lead the transition of
adult smokers to a smoke-free future (“Vision”). We are Moving Beyond SmokingTM, leading the way in moving adult smokers away
from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for
adult tobacco consumers, our businesses and society.
Our wholly owned subsidiaries include Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes
in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and
pipe tobacco and is a wholly owned subsidiary of PM USA; UST LLC (“UST”), which, through its wholly owned subsidiary U.S.
Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”)
and snus products; Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and
its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine
pouches; and NJOY, LLC (“NJOY”), which is engaged in the manufacture and sale of e-vapor products. Other wholly owned
subsidiaries include Altria Group Distribution Company, which provides sales and distribution services to our domestic operating
companies; and Altria Client Services LLC (“ALCS”), which provides various support services to our companies in areas such as legal,
regulatory, research and product development, consumer engagement, finance, human resources and external affairs.
On June 1, 2023, we completed our acquisition of NJOY Holdings, Inc. (“NJOY Holdings”), the parent of NJOY, for total consideration
of approximately $2.9 billion (“NJOY Transaction”), which consisted of approximately $2.75 billion in cash payments (net of cash
acquired) plus the fair value of certain contingent consideration. As a result of the acquisition, NJOY became a wholly owned
subsidiary of Altria. For further details, see Note 3. Acquisition of NJOY to our consolidated financial statements in Item 8. Financial
Statements and Supplementary Data of this Form 10-K (“Item 8”).
In March 2023, we entered into a stock transfer agreement with JUUL Labs, Inc. (“Stock Transfer Agreement”) pursuant to which we
transferred to JUUL Labs, Inc. (“JUUL”) all of our beneficially owned JUUL equity securities. In exchange, we received a non-
exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property.
In October 2022, we entered into a joint venture with JTI (US) Holding, Inc. (“JTIUH”), a subsidiary of Japan Tobacco Inc. (“Japan
Tobacco”), for the U.S. marketing and commercialization of heated tobacco stick (“HTS”) products. The joint venture entity, Horizon
Innovations LLC (“Horizon”), is structured to exist in perpetuity and is responsible for the U.S. commercialization of HTS products
owned by either party. PM USA holds a 75% economic interest in Horizon with JTIUH having a 25% economic interest. The parties
plan to collaborate on a global smoke-free partnership. Horizon is governed by a board of managers, which is comprised of four
individuals designated by PM USA and three individuals designated by JTIUH. For further information, see Other Tobacco Products
below.
In October 2021, we sold International Wine & Spirits Ltd. (“IWS”), which included Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”),
in an all-cash transaction with a net purchase price of approximately $1.2 billion and the assumption of certain liabilities of IWS and its
subsidiaries (“Ste. Michelle Transaction”).
In December 2020 and April 2021, we purchased the remaining 20% interest in (i) Helix ROW and (ii) Helix, respectively. The total
purchase price of the December 2020 and April 2021 transactions was approximately $250 million.
At December 31, 2023, our reportable segments were smokeable products and oral tobacco products. Our all other category included (i)
the financial results of NJOY (beginning June 1, 2023); (ii) Horizon; (iii) Helix ROW; and (iv) the IQOS System (as defined below)
heated tobacco business due to the relative financial contribution of these businesses to our consolidated results. Prior to the Ste.
Michelle Transaction, wine produced and/or sold by Ste. Michelle was a reportable segment. For further information, see Note 16.
Segment Reporting to our consolidated financial statements in Item 8. (“Note 16”).
Our investments include Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc. (“Cronos”), which we account for under the
equity method of accounting using a one-quarter lag.
For further discussion of our investments, see Note 7. Investments in Equity Securities to our consolidated financial statements in Item 8
(“Note 7”).
1
1
Description of Business
Portions of the information relating to this Item are included in Operating Results by Business Segment in Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K (“Item 7”).
Our operating companies include PM USA, USSTC, Middleton, Helix and NJOY.
The products of our operating companies include: (i) smokeable tobacco products, consisting of combustible cigarettes manufactured
and sold by PM USA and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; (ii) oral tobacco products,
consisting of MST and snus products manufactured and sold by USSTC and oral nicotine pouches manufactured and sold by Helix; and
(iii) e-vapor products contract manufactured by third-parties and sold by NJOY.
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Cigarettes: PM USA is the largest cigarette company in the United States and substantially all cigarettes are manufactured and
sold to customers in the United States. Marlboro, the principal cigarette brand of PM USA, has been the largest-selling cigarette brand
in the United States for over 45 years. Total smokeable products segment’s cigarettes shipment volume in the United States was
76.3 billion units in 2023, a decrease of 9.9% from 2022.
Cigars: Middleton is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco. Middleton contracts
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with a third-party importer to supply substantially all of its cigars and sells substantially all of its cigars to customers in the United
States. Black & Mild is the principal cigar brand of Middleton. Total smokeable products segment’s cigars shipment volume was
approximately 1.8 billion units in 2023, an increase of 2.8% from 2022.
Oral tobacco products: USSTC is the leading producer and marketer of MST products. The oral tobacco products segment
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includes the premium brands, Copenhagen and Skoal, and a value brand, Red Seal, sold by USSTC. In addition, the oral tobacco
products segment includes on! oral nicotine pouches sold by Helix. Substantially all of the oral tobacco products are manufactured and
sold to customers in the United States. Total oral tobacco products segment’s shipment volume was 782.9 million units in 2023, a
decrease of 2.2% from 2022.
E-Vapor products: NJOY contracts with third-party importers to supply all of its products and sells its e-vapor products to
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customers in the United States. NJOY ACE is the principal e-vapor product of NJOY. NJOY is currently the only e-vapor manufacturer
to receive market authorizations from the U.S. Food and Drug Administration (“FDA”) for a pod-based e-vapor product.
Other tobacco products: In connection with the joint venture agreement with JTIUH, Horizon will market and commercialize
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HTS products, which are defined in the joint venture agreement as products that include both (i) a tobacco heating device intended to
heat the consumable without combusting and (ii) a consumable that meets the definition of a cigarette under the U.S. Federal Cigarette
Labeling and Advertising Act. Horizon is responsible for the U.S. commercialization of current and future HTS products owned by
either party and, upon authorization by the FDA of a pre-market tobacco application (“PMTA”), will become the exclusive entity
through which the parties market and commercialize HTS products in the United States. Upon PMTA authorization of Ploom HTS
products, JTIUH will supply Ploom HTS devices and PM USA will manufacture Marlboro HTS consumables for U.S.
commercialization.
In October 2022, we agreed to assign to Philip Morris International Inc. (“PMI”) exclusive U.S. commercialization rights to the IQOS
Tobacco Heating System (“IQOS System”) effective April 30, 2024. For further discussion of the agreement with PMI see Note 6.
Goodwill and Other Intangible Assets, net to our consolidated financial statements in Item 8 (“Note 6”).
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(including distributors) and large retail organizations, including chain stores.
Distribution, Competition and Raw Materials: Our tobacco subsidiaries sell their tobacco products principally to wholesalers
The market for tobacco products is highly competitive, characterized by brand recognition and loyalty, with product quality, taste, price,
product innovation, marketing, packaging and distribution constituting the significant methods of competition. Promotional activities
include, in certain instances and where permitted by law, allowances, the distribution of incentive items, price promotions, product
promotions, coupons and other discounts.
In the United States, under a contract growing program, PM USA purchases the majority of its burley and flue-cured leaf tobaccos
directly from domestic tobacco growers. Under the terms of this program, PM USA agrees to purchase the amount of tobacco specified
in the grower contracts that meets PM USA’s grade and quality standards. PM USA also purchases a portion of its tobacco requirements
through leaf merchants.
USSTC purchases dark fire-cured, dark air-cured and burley leaf tobaccos from domestic tobacco growers under a contract growing
program. Under the terms of this program, USSTC agrees to purchase the amount of tobacco specified in the grower contracts that
meets USSTC’s grade and quality standards.
Middleton purchases burley, dark air-cured and flue-cured leaf tobaccos through leaf merchants. Middleton does not have a contract
growing program.
Helix, through an affiliate, and NJOY purchase tobacco-derived nicotine materials from suppliers and believe their suppliers can satisfy
current and anticipated future production requirements.
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Our tobacco subsidiaries believe there is an adequate supply of tobacco in the world markets to satisfy their current and anticipated
production requirements.
For further discussion of the foregoing matters, the business environment, trends in market demand and competitive conditions, and
related risks, see Item 1A. Risk Factors of this Form 10-K (“Item 1A”) and Operating Results by Business Segment - Business
Environment in Item 7.
Other Matters
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years ended December 31, 2023, 2022 and 2021, see Note 16.
Customers: For a discussion of our largest customers, including their percentages of our consolidated net revenues for the
Executive Officers of Altria: The disclosure regarding executive officers is included in Item 10. Directors, Executive Officers
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and Corporate Governance - Information about Our Executive Officers as of February 15, 2024 of this Form 10-K.
Human Capital Resources: We believe our workforce is critical to achieving our Vision. Attracting, developing, retaining
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and deploying the best talent with the skills to make significant progress toward our Vision is a key business priority. Moreover, we
recognize the importance of doing business the right way. We believe culture influences employee actions and decision making. This is
why we dedicate resources to promoting a vibrant, inclusive workplace; attracting, developing, retaining and deploying talented, diverse
employees; promoting a culture of compliance and integrity; creating a safe workplace; and rewarding and recognizing employees for
both the results they deliver and, importantly, how they deliver them.
Oversight and Management
Our Human Resources department is responsible for managing employment-related matters, including recruiting and hiring, onboarding,
compensation and benefits design and implementation, performance management, career management and succession planning and
professional and learning development. Our inclusion, diversity and equity (“ID&E”) programs are managed by our Corporate
Citizenship department. Our Board of Directors (“Board of Directors” or “Board”) and the Compensation and Talent Development
Committee provide oversight of human capital matters, including reviewing initiatives and programs related to corporate culture and
enterprise-wide talent development, including our ID&E initiatives.
Inclusion, Diversity and Equity
We recognize the critical importance of ID&E in pursuing our Vision and believe in the value of a workforce composed of a broad
spectrum of backgrounds and cultures. In 2020, we established the following aspirational Inclusion & Diversity Aiming Points to help
guide our efforts:
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Be an inclusive place to work for all employees, regardless of level, demographic group or work function.
Have equal numbers of men and women among our vice president and director-level employees.
Increase our vice president and director-level employees who are Asian, Black, Hispanic or two or more races to at least 30%.
Increase our vice president and director-level employees who are LGBTQ+, a person with a disability or a veteran.
Have diverse leadership teams that reflect the organizations they lead.
We maintain our commitment to building an inclusive organization and workforce that reflects the diversity of the labor market from
which we hire. Our data-driven efforts focus on removing barriers to equal opportunity in compliance with applicable law. We strive
for an organization that is more reflective of the diversity of the labor market from which we hire, and we remain committed to ID&E.
We monitor our ID&E progress through inclusive leadership ratings and other measures and report our ID&E progress annually through
our corporate responsibility reporting.
Compensation and Benefits
Our compensation and benefits programs are designed to help us attract, retain and motivate strong talent. However, we recognize that
the decreasing social acceptance of tobacco usage may impact our ability to attract and retain talent with skills necessary for us to
achieve our Vision. We work to manage this risk by, among other things, targeting total compensation packages to be above peer
companies with which we compete for talent. Depending on employee level, total compensation includes different elements – base
salary, annual cash incentives, long-term equity and cash incentives and benefits. We design our compensation program to deliver total
compensation at levels between the 50th and 75th percentiles of compensation paid to employees in comparable positions at our peer
companies. Actual total compensation can exceed the 75th percentile or be below the 50th percentile depending on business and
individual performance.
We are committed to pay equity across our companies. Based on the most recent annual analysis we conducted in November 2023, for
employees performing the same or similar duties regardless of any differentiating factors, such as performance and tenure, salaries of our
female employees were 97.8% of those of our male employees, and salaries of our employees of color were 98.1% of those of our white
employees. If we adjust for differentiating factors that legitimately influence pay, salaries of our female employees were 99.6% of those
of our male employees, and salaries of our employees of color were 99.9% of those of our white employees.
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In addition to cash and equity compensation, we offer generous employee benefits such as significant company contributions to deferred
profit sharing plans, consumer-driven health plan coverage, vacation and holiday pay, disability and life insurance. We also offer up to
12 weeks paid family leave to bond with a newborn child, the placement of a child for adoption or foster care, or to care for a family
member who has a serious health condition. Our benefits also include physical, emotional and financial wellness programs and family
creation assistance benefits, such as reimbursement of surrogacy, adoption assistance and fertility expenses. While there is some
variability in employee benefits across our companies, the examples we provide are available to most employees.
We are also committed to investing in the educational development of our workforce through a tuition refund program for job-related
courses or company-related degrees. We also provide eligible employees with a company-funded contribution applied to the employee’s
qualified higher education student loans to help reduce student loan debt.
Attracting, Developing, Retaining and Deploying Talent
Our salaried entry-level recruitment efforts focus on recruiting relationships with universities, internship opportunities and partnerships
with organizations that support diverse students. We complement these recruiting efforts with hiring experienced employees with
demonstrated skills and/or leadership capabilities.
To help our employees succeed in their roles and develop in their careers, we emphasize ongoing training and leadership development
opportunities. Building skills that drive innovation and aligning our employees to our Vision is important for our long-term success.
The Human Resources department leads our learning and development efforts partnering with learning professionals embedded in
functions throughout our operating and services companies. Employees have access to a wide variety of development programs,
including new employee onboarding, in-person, virtual and self-guided training programs, technical training, including training to
maintain professional certifications, and our educational refund program for continuing education.
We also have an employee recognition program that allows leaders and employees to reward and recognize colleagues for their
outstanding performance and everyday excellence.
We regularly conduct confidential employee engagement surveys to seek feedback on a variety of topics, including employee
satisfaction, support from leadership, corporate culture and culture of compliance. In addition, in 2023, these quarterly employee
surveys sought feedback on topics such as workplace flexibility, workload, inclusion, development opportunities, management support,
compliance and understanding of business strategy. Survey results, including comparisons to prior results, are shared with our
employees and our Board and are used to modify or enhance our human capital management programs.
Workplace Safety
Our goal is for every Altria employee to experience an injury-free career, which is supported by our Safety Management System
(“SMS”). We strive for continuous improvement in our employee safety program through SMS infrastructure. Our Occupational Safety
and Health Administration recordable injury rate for 2023 was 1.2% (versus 1.3% for 2022) and remains below the benchmark for
companies in the U.S. Beverage and Tobacco Product Manufacturing industry classification.
Number of Employees and Labor Relations
At December 31, 2023, we employed approximately 6,400 people. Twenty-seven percent of our employees were hourly manufacturing
employees who are members of labor unions subject to collective bargaining agreements. We believe we engage and collaborate
effectively with our hourly employees, as demonstrated by the positive working relationship between our companies and the unions. We
also have long-term agreements that resolve any collective bargaining dispute through binding arbitration, which further demonstrates
our trust-based relationship with the unions.
Supply Chain Human Capital Matters
We support efforts to address human capital concerns in the tobacco supply chain. For example, in our domestic tobacco supply chain,
in 2023, all of our domestic tobacco growers participated in the Good Agricultural Practices Certification Program to assess growers’
compliance with practices related to labor management and all of our tobacco suppliers participated in the tobacco industry’s Sustainable
Tobacco Program, which includes standards related to human and labor rights. Our tobacco companies also establish contract terms and
conditions with tobacco growers and leaf suppliers addressing child and forced labor and conduct social compliance audits at leaf
supplier facilities in high-risk tobacco growing regions within the United States and internationally. In addition, all suppliers of goods
and services that maintain operations in high-risk countries are subject to social compliance audits of those operations.
More information about efforts discussed in this section can be found in our Corporate Responsibility Reports at www.altria.com/
responsibility.
Intellectual Property: Trademarks are of material importance to us and are protected by registration or otherwise. In addition,
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as of December 31, 2023, the portfolio of United States patents owned by our businesses, as a whole, was material to us and our
businesses. However, no one patent or group of related patents was material to our businesses as of December 31, 2023. Our businesses
also have proprietary trade secrets, technology, know-how, processes and other intellectual property rights that are protected by
appropriate confidentiality measures. Certain trade secrets are material to us and our businesses.
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Government Regulations: We are subject to various federal, state and local laws and regulations. For example, the Family
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Smoking Prevention and Tobacco Control Act (“FSPTCA”) provides the FDA with broad authority to regulate the design, manufacture,
packaging, advertising, promotion, sale and distribution of tobacco products; the authority to require disclosures of related information;
and the authority to enforce the FSPTCA and related regulations. For further discussion of laws and regulations impacting our operating
companies, see Operating Results by Business Segment - Business Environment in Item 7.
We and our subsidiaries (and former subsidiaries) are also subject to various federal, state and local laws and regulations concerning the
discharge of materials into the environment, or otherwise related to environmental protection, including, in the United States: the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible
party. Our subsidiaries (and former subsidiaries) are involved in several matters subjecting them to potential costs of remediation and
natural resource damages under Superfund or other laws and regulations. Our subsidiaries expect to continue to make capital and other
expenditures in connection with environmental laws and regulations. As discussed in Note 2. Summary of Significant Accounting
Policies to our consolidated financial statements in Item 8 (“Note 2”), we provide for expenses associated with environmental
remediation obligations on an undiscounted basis when such amounts are probable and can be reasonably estimated. Such accruals are
adjusted as new information develops or circumstances change. Other than those amounts, it is not possible to reasonably estimate the
cost of any environmental remediation and compliance efforts that our subsidiaries may undertake in the future. In the opinion of
management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or
damages and related expenditures, has not had, and is not expected to have, a material adverse effect on our business, results of
operations, capital expenditures, financial position or cash flows.
Available Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and
Exchange Commission (“SEC”). The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers from which investors can electronically access our SEC filings.
We make available free of charge on or through our website (www.altria.com) our Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the SEC. Investors can access our filings with the SEC by visiting www.altria.com/secfilings.
The information on our respective websites is not, and shall not be deemed to be, a part of this Form 10-K or incorporated into any other
filings we make with the SEC.
Item 1A. Risk Factors.
Our business is subject to various risks and uncertainties that are difficult to predict, may materially affect actual results and are often
outside of our control. We identify a number of these risks and uncertainties below. You should read the following risk factors carefully
in connection with evaluating our business and the forward-looking statements contained in this Form 10-K.
This Form 10-K contains statements concerning our expectations, plans, objectives, future financial performance and other statements
that are not historical facts. You can identify these forward-looking statements by use of words such as “strategy,” “expects,”
“continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “forecasts,” “intends,” “projects,” “goals,” “objectives,” “guidance,”
“targets” and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or
current facts.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans,
estimates and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions that may prove to be
inaccurate. If risks or uncertainties materialize, or if underlying estimates or assumptions prove inaccurate, actual results could differ
materially from those anticipated. You should bear this in mind as you consider forward-looking statements and whether to invest in or
remain invested in our securities. Under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we
identify important factors that, individually or in the aggregate, could cause actual results and outcomes, including with respect to our
ability to achieve our Vision, to differ materially from those contained in, or implied by, any forward-looking statements we make. We
elaborate on these important factors and the risks we face throughout this Form 10-K, particularly in the “Executive Summary” and
“Business Environment” sections preceding our discussion of the operating results of our segments in Item 7. You should understand
that it is not possible to predict or identify all factors and risks. Consequently, you should not consider the foregoing list to be complete.
We do not undertake to update any forward-looking statement that we may make from time to time except as required by applicable law.
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Risks Relating to Our Business
Business Operations Risks
We may be unsuccessful in anticipating and responding to changes in adult tobacco consumer preferences and purchase
behavior, including as a result of difficult economic conditions, which could have a material adverse effect on our business,
results of operations, cash flows or financial position.
Our operating companies’ portfolios of tobacco products are largely comprised of premium brands, such as Marlboro, Copenhagen and
Skoal. As adult tobacco consumer preferences evolve, consumers are increasingly moving across tobacco categories. The willingness of
adult tobacco consumers to purchase premium brands is affected by macroeconomic conditions, including inflation and overall
economic stability. In periods of economic uncertainty and high inflation, among other conditions, we have observed adult tobacco
consumers reduce consumption, purchase more discount brands and consider lower-priced tobacco products, including different
categories of tobacco products than those they traditionally purchase.
Our ability to effectively respond to new and evolving adult tobacco consumer purchase behavior catalyzed by challenging
macroeconomic conditions and changes in adult tobacco consumer preferences depends on our ability to promote brand equity
successfully among our premium and discount brands and broaden our product portfolios across price-points and categories, including
by bringing to market new and innovative tobacco products that appeal to adult tobacco consumers. Our failure to do so or our failure to
anticipate changing adult tobacco consumer preferences, improve productivity or protect or enhance margins through cost savings and
price increases, could have a material adverse effect on our business, results of operations, cash flows or financial position.
We face significant competition, and our failure to compete effectively could have a material adverse effect on our business,
results of operations, cash flows or financial position and our ability to achieve our Vision.
Our operating companies operate in highly competitive environments. Significant competition exists with respect to product quality,
taste, price, product innovation, marketing, packaging, distribution and promotional activities. Because many of our operating
companies’ products are market leaders, we are subject to antitrust risk. In addition, as adult tobacco consumer preferences evolve,
consumers are increasingly moving across tobacco categories. Our operating companies’ failure to compete effectively in these
environments could negatively impact profitability, market share (including as a result of down-trading to lower-priced competitive
brands) and shipment volume, which could have a material adverse effect on our business, results of operations, cash flows or financial
position and our ability to achieve our Vision.
The growth of innovative tobacco products, including e-vapor products and oral nicotine pouches, has contributed to reductions in the
consumption levels and industry sales volumes of cigarettes and other tobacco products, including MST. Furthermore, the sale of illegal
flavored disposable e-vapor products has negatively impacted the growth of other e-vapor products. If we are unable to compete
effectively in innovative tobacco product categories, including through internal product development, on! oral nicotine pouch products,
NJOY e-vapor products, our participation in Horizon, other potential future partnerships with Japan Tobacco and potential future
relationships and investments, such inability could have a material adverse impact on our business, results of operations, cash flows or
financial position and our ability to achieve our Vision.
PM USA also faces competition from lower-priced brands sold by certain United States and foreign manufacturers that have cost
advantages because they are not parties to settlements of certain healthcare cost recovery litigation in the United States and, as such, are
not required to make annual settlement payments as required by the parties to the settlements. These settlement payments, which are
inflation-adjusted, are significant for PM USA and have contributed to substantial cigarette price increases to help cover their cost.
Manufacturers not party to the settlements are subject to state escrow legislation requiring escrow deposits. Such manufacturers may
avoid these escrow obligations by concentrating on certain states where escrow deposits are not required or are required on fewer than
all such manufacturers’ cigarettes sold in such states. Additional competition has resulted from diversion into the United States market
of cigarettes intended for sale outside the United States, diversion of tobacco products intended for sale in one taxing jurisdiction within
the United States into another taxing jurisdiction, the sale of counterfeit cigarettes by third parties, the sale of cigarettes by third parties
over the Internet and by other means designed to avoid collection of applicable taxes, and imports of foreign lower-priced brands.
Competition may also result from tax advantages available to companies with significant imports and exports of finished goods. The
market shares of our operating companies’ products also have been negatively impacted by increases in competitive discount product
share for cigarettes and MST products, as price sensitive adult tobacco consumers react to their economic conditions. Our failure to
compete with lower-priced cigarette brands and counter the impacts of illicit trade in tobacco products could have a material adverse
effect on our business, results of operations, cash flows or financial position.
In the e-vapor category, illegal flavored disposable product usage has increased, and such products comprise a significant portion of the
e-vapor category, which has increased the rate of cross-category movement among adult cigarette smokers and contributed to higher
than expected domestic cigarette industry volume decline. We have increased engagement with the FDA and other government agencies
and taken legal action to protect our lawful e-vapor business, which expose us to additional costs and expenses. Our failure to counter
the impacts of illegal flavored disposable e-vapor products and the FDA’s failure to take enforcement actions against manufacturers and
products that violate the law could have a material adverse effect on our business, results of operations, cash flows or financial position.
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We may be unsuccessful in commercializing innovative products, including tobacco products with reduced health risks relative
to certain other tobacco products and that appeal to adult tobacco consumers, which may have a material adverse effect on our
business, results of operations, cash flows or financial position and our ability to achieve our Vision.
We have growth strategies involving innovative products that may have reduced health risks relative to certain other tobacco products,
while continuing to offer adult tobacco consumers (within and outside the United States) products that meet their taste expectations and
evolving preferences. These strategies include products in the e-vapor, heated tobacco and oral nicotine pouch spaces. For example, we
have plans to increase the distribution of NJOY products, enhance NJOY ACE’s brand equity, increase the brand’s awareness and appeal
and receive FDA authorizations on certain NJOY products. If we are not successful in executing these strategies, there could be a
material negative impact on our business and our ability to achieve our Vision.
The success of Horizon, our joint venture with JTIUH for the marketing and commercialization of HTS products in the United States, in
generating new revenue streams by commercializing current and future HTS products owned by us or Japan Tobacco is dependent upon
a number of factors. These factors include (i) receipt of regulatory authorizations, (ii) prevailing economic, market, regulatory or
business conditions, or changes in such conditions, negatively affecting the parties or their plans for future collaboration and
partnerships, (iii) changes in market or other conditions resulting in unanticipated delays in the design and development of future
products or the commencement of test launches, (iv) the outcome of any legal proceedings or investigations that may be instituted
against the parties or others related to the joint venture, (v) changes in the preferences of U.S. adult tobacco consumers, (vi) the failure to
meet commercialization milestones and (vii) the ability of the parties to enter into future partnerships on terms acceptable to both parties
and in the expected manner or timeframe, if at all. Such factors could have a negative effect on our ability to generate new revenue
streams and enter new geographic markets.
If we do not succeed in commercializing innovative tobacco products that appeal to adult tobacco consumers or we fail to obtain or
maintain regulatory authorization for the marketing or sale of these products, including with claims of reduced health risks, we could be
at a competitive disadvantage, which could have a material adverse effect on our business, results of operations, cash flows or financial
position and our ability to achieve our Vision.
Failure to complete or manage strategic transactions, including acquisitions, dispositions, joint ventures and investments in third
parties, or realize the anticipated benefits of such transactions, could have a material adverse effect on our business, financial
position and our ability to achieve our Vision.
We regularly evaluate potential strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties.
Opportunities for strategic transactions may be limited, and the success of any such transaction is dependent upon our ability to complete
and realize the expected benefits of the transaction in the expected time frame or at all. Following the completion of a transaction there
may be certain financial, managerial, staffing and talent and operational risks, including diversion of management’s attention from
existing core businesses, difficulties integrating other businesses into existing operations and other challenges presented by a transaction
that does not achieve anticipated sales levels and profitability. We may not be able to enter into attractive business relationships or
execute and complete strategic transactions on favorable terms or at all, and any such relationships or transactions may not improve our
competitive position or have the intended financial outcomes. For example, our former investment in JUUL did not result in and, to
date, our investment in Cronos has not, resulted in the economic and competitive advantages expected at the time the investments were
made.
We may not be able to realize the expected benefits of the NJOY Transaction in the expected manner or timeframe, if at all, including
due to failure to receive or maintain regulatory authorizations, changes in adult tobacco consumer preferences, failure to comply with
regulatory requirements, prevailing economic, market, regulatory or business conditions, or changes in such conditions, negatively
affecting our business and our plans with respect to the e-vapor category, the outcome of any legal proceeding or investigation that may
be instituted against the parties or others related to the NJOY Transaction or NJOY or its products and the occurrence of any event
requiring us to write down the value of NJOY’s intangible assets, including trademarks and goodwill, due to impairment.
If the NJOY Transaction or any other acquisition, disposition, joint venture, investment in a third party or other strategic relationship is
not successful, there could be a material negative impact on our business, financial position and results of operations and our ability to
achieve our Vision.
Significant changes in price, availability or quality of tobacco, other raw materials or component parts could have a material
adverse effect on our profitability and business.
Shifts in crops (such as those driven by macroeconomic conditions and adverse weather patterns), government restrictions and mandated
prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation,
geopolitical instability, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or
reduce the supply or quality of tobacco, other raw materials, ingredients or component parts used to manufacture our products. Any
significant change in such factors could restrict our ability to continue manufacturing and marketing existing products or impact adult
tobacco consumer product acceptability and have a material adverse effect on our business and profitability.
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For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political
instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability
and quality. In addition, as consumer demand increases for innovative smoke-free products and decreases for combustible and MST
products, the volume of tobacco leaf required for production of these products has decreased, resulting in reduced tobacco leaf demand.
Reduced demand may result in the reduced supply and availability of domestic tobacco as growers divert resources to other crops or
cease farming. The unavailability or unacceptability of any one or more particular varieties of tobacco leaf or the unavailability of
nicotine extract necessary to manufacture our operating companies’ products could restrict our ability to continue marketing existing
products or impact adult tobacco consumer product acceptability, which could have a material adverse effect on our business and
profitability. In addition, the nicotine used in our operating companies’ innovative smoke-free products is extracted from tobacco
produced in one country. If we are unable to identify alternate sources of nicotine for our operating companies’ innovative products, we
could be exposed to the risks discussed above.
Current macroeconomic conditions and geopolitical instability (including inflation, high interest rates, labor shortages, supply and
demand imbalances, geopolitical instability and international armed conflicts) are causing worldwide disruptions and delays to supply
chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for
example, tobacco leaf and resins and aluminum used in our packaging). Furthermore, challenging economic conditions can create the
risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may
impact their ability to provide us with or distribute finished product, raw materials and component parts and services in a timely manner
or at all.
In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the
costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our products. For example, certain
states have passed extended producer responsibility legislation concerning packaging. Because certain of our products’ packaging
consists of single-use plastics, single-use plastic bans and extended producer responsibility mandates could result in bans on some of our
product packaging or our products and adversely impact our costs and revenues. Additional taxes and limitations on the use of certain
single-use plastics have been proposed by the U.S. Congress and various state and local governments. These existing and potential
future laws and regulations could increase the costs of, and impair our ability to, source certain materials used in the packaging for our
products.
If we are unable to compensate for supply shortages or elevated commodity and other costs through sustained price increases, cost
efficiencies, such as in manufacturing and distribution, or otherwise manage the exposure through sourcing strategies, the limited use of
commodity hedging contracts or through other initiatives, our business, results of operations, cash flows and financial condition could be
materially adversely impacted.
Our operating companies rely on a few significant facilities and a small number of key suppliers, distributors and distribution
chain service providers, and an extended disruption at a facility or in service by a supplier, distributor or distribution chain
service provider could have a material adverse effect on our business, results of operations, cash flows or financial position.
Our operating companies face risks inherent in reliance on a few significant manufacturing facilities and a small number of key
suppliers, distributors and distribution chain service providers. A natural or man-made disaster, cybersecurity incident, global pandemic
or other disruption that affects the manufacturing operations of any of our operating companies, the operations of any key supplier,
distributor or distribution chain service provider of any of our operating companies or any other disruption in the supply or distribution
of goods or services (including a key supplier’s inability to comply with government regulations, lack of available workers or
unwillingness to supply goods or services to a tobacco company) could adversely impact operations. Operations of our operating
companies, suppliers, distributors and distribution chain service providers could be suspended temporarily once or multiple times, or
halted permanently, depending on various factors. An extended disruption in operations experienced by one or more of our operating
companies or in the supply or distribution of goods or services by one or more key suppliers, distributors or distribution chain service
providers, could have a material adverse effect on our business, results of operations, cash flows or financial position.
We may be required to write down intangible assets, including trademarks and goodwill, due to impairment, which could have a
material adverse effect on our results of operations or financial position.
We periodically calculate the fair value of our reporting units and intangible assets to test for impairment. This calculation may be
affected by several factors, including general macroeconomic conditions, government actions, including FDA regulatory actions and
inaction, changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences, success of planned new
product expansions, competitive activity, unfavorable outcomes with respect to litigation proceedings, including actions brought against
us alleging patent infringement, and income and excise taxes. Certain events also can trigger an immediate review of intangible assets.
If an impairment is determined to exist, we will incur impairment losses, which could have a material adverse effect on our results of
operations or financial position.
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We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation,
results of operations, cash flows or financial position.
We could decide, or laws or regulations could require us, to recall products due to the failure to meet quality standards or specifications,
suspected or confirmed and deliberate or unintentional product contamination, or other product adulteration, misbranding or tampering.
A product recall or a product liability or other claim (even if unsuccessful or without merit) could have negative economic consequences
and also generate negative publicity about us and our products. In addition, if another company recalls or experiences negative publicity
related to a product in a category in which we compete, adult tobacco consumers might reduce their overall consumption of products in
the category. Any of these events could have a material adverse effect on our business, reputation, results of operations, cash flows or
financial position.
We face various risks related to health epidemics and pandemics, and such events, and the measures that international, federal,
state and local governments, agencies, law enforcement and health authorities implement to address them, could have a material
adverse effect on our business, results of operations, cash flows or financial position.
An epidemic, pandemic or other significant public health emergency, and the measures taken by governmental authorities to address it,
could significantly disrupt our ability to operate our businesses in the ordinary course. Furthermore, any associated economic
consequences could have a material adverse effect on our business, results of operations, cash flows or financial position.
If any public health emergency were to occur in the future, we could experience negative impacts. In addition, the specific
characteristics of any future public health emergency and associated governmental responses could result in other negative impacts that
we cannot foresee. Accordingly, any future emergence or resurgence of an epidemic, pandemic or other public health emergency could
have a material adverse effect on our business, results of operations, cash flows or financial position.
We may be unable to attract and retain a highly skilled and diverse workforce due to the decreasing social acceptance of tobacco
usage, tobacco control actions and other factors, which could have a material adverse effect on our business and our ability to
achieve our Vision.
Our ability to implement our strategy of attracting and retaining a highly skilled and diverse workforce may be impaired by the
decreasing social acceptance of tobacco usage, tobacco regulation and control actions and other factors. The tobacco industry competes
for talent with the consumer products industry and other companies that may enjoy greater societal acceptance and fewer long-term
challenges. As a result, we may be unable to attract and retain highly skilled and diverse talent. In addition, our ability to retain a highly
skilled and diverse workforce may be adversely affected by competition for highly skilled and diverse workers. Failure to attract and
retain highly skilled and diverse talent could have a material adverse effect on our business and our ability to achieve our Vision.
Litigation, Legislative and Regulatory Risks
Unfavorable outcomes with respect to litigation proceedings or any governmental investigations could materially adversely affect
our results of operations, cash flows or financial position and our ability to achieve our Vision.
Legal proceedings covering a wide range of matters are pending or threatened in various U.S. and foreign jurisdictions against us and
our subsidiaries, including PM USA, as well as our and their respective indemnitees and indemnitors. Various types of claims may be
raised in these proceedings, including product liability, unfair trade practices, antitrust, tax, contraband-related claims, patent
infringement, employment matters, claims alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”),
claims for contribution and claims of competitors, shareholders and distributors. Legislative action, such as changes to tort law, also
may expand the types of claims and remedies available to plaintiffs.
Competitors and other third parties have brought and may in the future bring action against us, our subsidiaries and/or our suppliers
alleging patent infringement. Such claims, regardless of merit, expose us to significant litigation costs and damages, importation bans
with respect to products and product components manufactured abroad, divert management’s attention and compromise our operating
companies’ abilities to commercialize and improve their products. This risk is especially pertinent to smoke-free products where
technology continues advancing rapidly, resulting in a high volume of patents in relevant technology spaces. In a patent lawsuit
adjudicated before the U.S. International Trade Commission (“ITC”), the ITC banned the importation of IQOS devices, Marlboro
HeatSticks and component parts into the United States and the sale and marketing of any such products previously imported into the
United States. As a result of the ITC’s decision, PM USA removed the IQOS devices, Marlboro HeatSticks and any infringing
components from the marketplace. In a separate patent lawsuit brought by JUUL currently pending before the ITC, the ITC could
impose similar restrictions on NJOY ACE. Any ban on the importation or sale of NJOY ACE could have a negative impact on our
business, our valuation of NJOY’s assets and our plans with respect to the e-vapor category.
In certain litigation, we and our subsidiaries may face potentially significant non-monetary remedies in addition to importation bans that
could have a material adverse effect on our businesses. For example, in the Federal Government’s lawsuit alleging that certain
defendants, including Altria and PM USA, violated RICO and engaged in certain “sub-schemes” to defraud, the district court did not
impose monetary penalties but ordered significant non-monetary remedies, including the issuance of “corrective statements.”
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Litigation is subject to significant uncertainty, and there could be adverse developments in pending or future cases. An unfavorable
outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation.
Damages claimed in some tobacco-related or other litigation are significant and, in certain cases, have ranged in the billions of dollars.
The variability in pleadings in multiple jurisdictions and the actual experience of management in litigating claims demonstrate that the
monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome.
In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, we may face the risk that one or more co-
defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated
share of a judgment. As a result, we may have to pay more than our proportionate share of any bonding- or judgment-related amounts
under certain circumstances. Furthermore, in cases where plaintiffs are successful, we also may be required to pay interest and
attorneys’ fees.
Although we historically have been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from
seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all
cases. This risk has been substantially reduced given that 47 states and Puerto Rico now limit the dollar amount of bonds or require no
bond at all. However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and
plaintiffs may challenge state bond cap statutes in other jurisdictions as well. Such challenges may include the applicability of state
bond caps in federal court. Although we cannot predict the outcome of such challenges, it is possible that our business, results of
operations, cash flows or financial position could be materially adversely affected in a particular fiscal quarter or fiscal year by an
unfavorable outcome of one or more such challenges.
Each of Altria and our subsidiaries named as a defendant in pending litigation believes, and each has been so advised by counsel
handling the respective cases, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse
verdicts.
We have defended, and will continue to defend, vigorously against litigation challenges. However, we may enter into settlement
discussions in particular cases if we believe it is in our best interests to do so.
We cannot predict the outcome of any litigation proceedings or governmental investigations, and unfavorable outcomes in any such
proceedings or investigations could materially adversely affect our results of operations, cash flows or financial position.
Significant federal, state and local governmental actions, including FDA regulatory actions and inaction, and various private
sector actions may continue to have a material adverse impact on our operating companies’ sales volumes and our business.
We face significant governmental and private sector actions, including efforts aimed at reducing the incidence of tobacco use and
seeking to hold us responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco
smoke. These actions, combined with the diminishing social acceptance of smoking, have resulted in reduced cigarette industry volume,
and we expect that these factors will continue to reduce cigarette consumption levels, which could have a material adverse effect on our
business, results of operations, cash flows or financial position.
We cannot predict whether regulators, including the FDA, will permit the marketing or sale of any particular innovative products
(including products with claims of reduced risk to adult tobacco consumers) or whether they will impose a burdensome regulatory
framework on such products. In addition, the FDA could, for a variety of reasons, determine that innovative products on the market but
pending FDA review of the associated PMTA (such as on! oral nicotine pouches), or those that have previously received authorization,
including with a claim of reduced exposure, are not appropriate for the public health, and the FDA could require such products be taken
off the market. We also cannot predict whether or to what extent the FDA will take enforcement actions against manufacturers and
products that violate the law.
The actions and inaction of regulators, including the FDA, can result in competitive challenges. For example, unpredictable regulatory
review periods complicate efforts to strategize and plan with respect to commercialization of a new product once its PMTA is
authorized, and we cannot predict or influence the speed with which the FDA reviews PMTAs. A protracted FDA review of a PMTA
with respect to our product would allow competitive products already on the market to establish market share, brand recognition and
adult tobacco consumer loyalty in the absence of competition from our product. Additionally, we cannot control the order in which the
FDA reviews PMTAs. The FDA could review a PMTA for a competitor’s product before it reviews a PMTA submitted by one of our
operating companies with respect to a competing product notwithstanding that our operating company submitted its PMTA first.
Scenarios such as these would put us at a competitive disadvantage, which could have a material adverse impact on our business,
profitability and our ability to achieve our Vision.
In addition to the outcomes discussed above, actions and inaction by the FDA and other federal, state or local governments or agencies
can (i) impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through nicotine or constituent
limits or menthol or other flavor bans), (ii) limit adult tobacco consumer choices, (iii) restrict communications to adult tobacco
consumers, (iv) restrict the ability to differentiate tobacco products, (v) impose additional manufacturing, labeling or packing
requirements, (vi) interrupt manufacturing or otherwise significantly increase the cost of doing business, (vii) result in increased illicit
trade in tobacco products, (viii) restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco
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products by certain retail establishments, (ix) require the recall of tobacco products due to a determination relating to product
contamination or (x) otherwise require the removal of tobacco products from the marketplace (for example, due to a determination that
one or more tobacco products fail to satisfy the statutory requirements for substantial equivalence, must proceed through the pre-market
review process or must be removed from the marketplace for the protection of public health).
Any federal, state or local governmental action, including regulatory actions and inaction by the FDA, may have a material adverse
impact on our business, results of operations, cash flows or financial position. Such action and inaction also could negatively impact
adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.
Tobacco products are subject to substantial taxation, and any increases in tobacco product-related taxes could have a material
adverse impact on sales of our operating companies’ products.
Tobacco products are subject to substantial taxation, including excise taxes. Significant increases in taxes or fees on tobacco products
(including traditional products as well as e-vapor and oral nicotine products) have been proposed or enacted and are likely to continue to
be proposed or enacted within the United States at the federal, state and local levels. The frequency and magnitude of excise tax
increases can be influenced by various factors, including federal and state budgets and the composition of executive and legislative
bodies. Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ tobacco products through
lower consumption levels and the potential shift in adult tobacco consumer purchases from the premium to the non-premium or discount
segments, to other low-priced or low-taxed tobacco products or to counterfeit and contraband products. Such shifts may also have an
adverse impact on the reported share performance of our tobacco products. Any increases in tobacco-related taxes or fees could have a
material adverse impact on our business, results of operations, cash flows or financial position. In addition, substantial excise tax
increases on e-vapor and oral nicotine products could negatively impact adult smokers’ transition to these products, which could
materially adversely affect our ability to achieve our Vision.
International business operations subject us to various U.S. and foreign laws and regulations, and violations of such laws or
regulations could result in reputational harm, legal challenges and significant penalties and other costs.
While we are primarily engaged in business activities in the United States, we engage (directly or indirectly) in certain international
business activities that are subject to various U.S. and foreign laws and regulations, such as foreign privacy laws, the U.S. Foreign
Corrupt Practices Act and other laws prohibiting bribery and corruption. Although we have a Code of Conduct for Compliance and
Integrity and a compliance system designed to prevent and detect violations of applicable law, no system can provide assurance that it
will always protect against improper actions by employees, joint venture partners, investees or third parties. Violations of these laws, or
allegations of such violations could result in reputational harm, legal challenges and significant penalties and other costs.
A challenge to our tax positions, an increase in the income tax rate or other changes to federal or state tax laws could materially
adversely affect our earnings or cash flows.
Tax laws and regulations are complex and subject to varying interpretations. A successful challenge to one or more of our tax positions
(which could give rise to additional liabilities, including interest and potential penalties), an increase in the corporate income tax rate or
other changes to federal or state tax laws, including changes to how foreign investments are taxed, could materially adversely affect our
earnings or cash flows.
Legal and regulatory requirements related to climate change and other environmental sustainability matters could have a
material adverse impact on our business and results of operations.
The increased concern over climate change and other sustainability matters is likely to result in new or additional legal and regulatory
requirements intended to reduce or mitigate environmental issues and may relate to, among other things, greenhouse gas emissions,
alternative energy policy, single-use plastics and additional disclosure obligations with respect to climate change and environmental
sustainability matters. This additional regulation could materially adversely affect our business, results of operations, cash flows and
financial condition by increasing our compliance and manufacturing costs and negatively impacting our reputation if we are unable to, or
are perceived not to, satisfy such requirements.
Capital Markets and Financing Risks
Disruption and uncertainty in the credit and capital markets could materially adversely affect our business.
Access to the credit and capital markets is important for us to satisfy our liquidity and financing needs. We typically access the
commercial paper market in the second quarter to help fund payments under the Master Settlement Agreement (the “MSA”), tax
obligations and shareholder dividends. Disruption and uncertainty in the credit or capital markets or high interest rates could negatively
impact the availability or cost of capital and adversely affect our liquidity, cash flow, earnings and dividend rate. In addition, tighter
credit markets could lead to business disruptions for our suppliers and service providers, which could, in turn, materially adversely
impact our business, results of operations, cash flows and financial condition.
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A downgrade or potential downgrade of our credit ratings could adversely impact our borrowing costs and access to credit and
capital markets, which could materially adversely affect our financial condition.
Rating agencies routinely evaluate us, and their ratings are based on a number of factors, including our cash generating capability, levels
of indebtedness, policies with respect to shareholder distributions, the impact of strategic transactions and our financial strength
generally, as well as factors beyond our control, such as the state of the economy and our industry. Any downgrade or announcement
that we are under review for a potential downgrade of our credit ratings, as occurred following our former investment in JUUL,
especially any downgrade to below investment grade, could increase our future borrowing costs, impair our ability to access the credit
and capital markets, including the commercial paper market, on terms commercially acceptable to us or at all or result in a reduction in
our liquidity, requiring us to rely on more expensive types of financing. Any such outcome could have a material adverse impact on our
financial condition.
We may be unable to attract investors due to increasing investor expectations of our performance relating to corporate
responsibility factors.
There has been a heightened focus from investors and other stakeholders on corporate responsibility, including with respect to
environmental, social and governance matters. In response, there has been an increase in third-party providers of assessments and
ratings to satisfy investor demand for measurement of corporate responsibility performance, and the criteria by which these third parties
measure such performance may vary or change over time. Investors may use these non-financial performance factors to guide
investment strategies and, in some cases, may choose not to invest in us if their policies prevent them from investing in tobacco
companies or if they believe our policies, actions or disclosures on corporate responsibility issues are inadequate. There is also increased
focus, including by governmental and non-governmental organizations, investors, trade customers, consumers, our employees and other
stakeholders, on sustainability matters. Despite our efforts, any failure to achieve our corporate responsibility goals, including those
aimed at reducing the harm associated with our companies’ products and our underage tobacco prevention goals, could result in adverse
publicity, materially adversely affect our business and reputation and impair our ability to attract and retain investors, which could have
a material negative impact on the market value of our stock.
Information Technology and Data Privacy Risks
The failure of our, or our service providers’, key suppliers’ or trade customers’, information systems to function as intended, or
cyber-attacks or security breaches, could have a material adverse effect on our business, reputation, results of operations, cash
flows or financial position.
We rely extensively on information technology, much of which is managed by third-party service providers (such as cloud data service
providers), to support a variety of business processes and activities, including: complying with regulatory, legal, financial reporting and
tax requirements; engaging in marketing and e-commerce activities; managing and improving the effectiveness of our operations;
researching, developing, manufacturing and distributing our products; collecting and storing sensitive data and confidential information;
and communicating with employees, investors, suppliers, trade customers, adult tobacco consumers and others. Our suppliers, supply
chain service providers and trade customers also rely extensively on information systems. We continue to make appropriate investments
in administrative, technical and physical safeguards to protect our information systems and data from cyber-threats, including human
error and malicious acts. Our safeguards include employee training, testing and auditing protocols, backup systems and business
continuity plans, maintenance of security policies and procedures, monitoring of networks and systems, and third-party risk
management.
From time-to-time, we and our service providers, suppliers and trade customers experience attempts to infiltrate and interrupt
information systems. To date, interruptions of these information systems as a result of infiltration attempts have not had a material
impact on our operations. However, because technology is increasingly complex and cyber-attacks are increasingly sophisticated and
more frequent, there can be no assurance that such incidents will not have a material adverse effect on us in the future. For example, the
rapid evolution and increased adoption of artificial intelligence technologies may intensify our and our service providers’, key suppliers’
and trade customers’ cybersecurity risks. Failure of our, or our service providers’, key suppliers’ or trade customers’, information
systems to function as intended, or cyber-attacks or security breaches, could result in loss of revenue, assets, personal data, intellectual
property, trade secrets or other sensitive and confidential data, violation of applicable privacy and data security laws, reputational harm
to the companies and their brands, operational disruptions, legal challenges and significant remediation and other costs, all of which
could have a material adverse effect on our business.
Our failure, or the failure of our service providers, key suppliers or trade customers, to comply with personal data protection,
privacy, artificial intelligence and information security laws could materially adversely affect our business.
We and our service providers, key suppliers and trade customers are subject to a variety of continuously evolving and developing laws
and regulations in numerous jurisdictions regarding personal data protection, privacy, artificial intelligence and information security.
These laws and regulations may be interpreted and applied differently from country to country or, within the United States, from state to
state, and can create inconsistent or conflicting requirements. Our efforts, and the efforts of our service providers, key suppliers and
trade customers, to comply with these laws and regulations impose significant costs and challenges that are likely to continue to increase
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over time, particularly as additional jurisdictions adopt similar regulations. Failure to comply with these laws and regulations or to
otherwise protect personal data from unauthorized access, use or other processing, could result in litigation, claims, legal or regulatory
proceedings, inquiries or investigations, damage to our reputation, fines, penalties and business disruptions, all of which could have a
material adverse effect on our business.
Risks Relating to Our Investments in Equity Securities
The expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, which could
have a material adverse impact on our financial position or earnings.
The expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, including due to
foreign currency exchange rates; ABI’s business results; ABI’s share price; impairment losses on the value of our investment; our
incurrence of additional tax liabilities related to our investment in ABI; and potential reductions in the number of directors that we can
have appointed to the ABI board of directors.
We account for our investment in ABI under the equity method of accounting. For purposes of financial reporting, the earnings from
and carrying value of our investment in ABI are translated into U.S. dollars (“USD”) from various local currencies. In addition, ABI
pays dividends in euros, which we convert into USD. During times of a strengthening USD against these currencies, our reported
earnings from and carrying value of our investment in ABI will be reduced because these currencies will translate into fewer USD and
the dividends that we receive from ABI will convert into fewer USD. Dividends and earnings from and carrying value of our investment
in ABI are also subject to the risks encountered by ABI in its business, its business outlook, cash flow requirements and financial
performance, the state of the market and the general economic climate. For example, in 2020, as a result of the uncertainty, volatility
and impact of the COVID-19 pandemic on ABI’s business, ABI reduced by 50% its final 2019 dividend paid in the second quarter of
2020 and did not pay its interim 2020 dividend that would have been paid in the fourth quarter of 2020, which resulted in a reduction of
cash dividends we received from ABI.
We assess the value of our investment in ABI as required by United States generally accepted accounting principles (“GAAP”). If the
carrying value of our investment in ABI exceeds its fair value and any loss in value is other than temporary, we record appropriate
impairment losses. In a prior period, we concluded that the fair value of our investment in ABI declined below the carrying value of our
investment in ABI and that this decline in fair value was other than temporary. As a result, we recorded a non-cash, pre-tax impairment
charge for that period. It is possible that we may be required to record significant impairment charges in the future and, if we do so, our
net income and carrying value of our investment in ABI could be materially adversely affected.
In the event that our ownership percentage in ABI were to decrease below certain levels, (i) we may be subject to additional tax
liabilities, (ii) the number of directors that we have the right to have appointed to the ABI board of directors could be reduced from two
to one or zero and (iii) we may be unable to continue to account for our investment in ABI under the equity method of accounting.
Our investment in Cronos subjects us to certain risks associated with Cronos’s business, including legal, regulatory and
reputational risks.
Our investment in Cronos, a Canadian cannabinoid company, subjects us to various risks relating to Cronos’s business, such as legal,
regulatory and reputational risks. Cronos is engaged in the cultivation, manufacture and marketing of cannabis and cannabis-derived
products for the medical and adult-use markets in various international jurisdictions. Accordingly, Cronos’s operations are subject to
laws, regulations and guidelines promulgated by various governmental authorities. In the United States, these laws include the
Controlled Substances Act, the Civil Assets Forfeiture Reform Act (as it relates to violation of the Controlled Substances Act), all related
applicable anti-money laundering laws and FDA regulations. A failure by Cronos or Altria to comply with applicable laws, including
cannabis laws, could result in criminal, civil or tax liability, negative impacts on the availability and cost of capital and credit or
reputational harm for Altria.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
We rely extensively on information technology, much of which is managed by third-party service providers (such as cloud data service
providers), to support a variety of business processes and activities, including: complying with regulatory, legal, financial reporting and
tax requirements; engaging in marketing and e-commerce activities; managing and improving the effectiveness of our operations;
researching, developing, manufacturing and distributing our products; collecting and storing sensitive data and confidential information;
and communicating with employees, investors, suppliers, trade customers, adult tobacco consumers and others. Recognizing the critical
importance of cybersecurity in today’s digital landscape, we are committed to safeguarding our information assets, protecting consumer
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data and maintaining the integrity and availability of our systems. Accordingly, we have implemented an extensive cybersecurity risk
management framework designed to identify, assess, mitigate and prevent potential cybersecurity risks and to align with industry best
practices and all applicable regulatory requirements. We evaluate our cybersecurity risk management framework against the National
Institute of Standards and Technology’s Cybersecurity Framework, which outlines the core components and responsibilities necessary to
sustain a healthy and well-balanced cybersecurity program. We also align our security standards for infrastructure configuration with
the Center for Internet Security’s Benchmarks, which are prescriptive recommendations based upon the consensus of global
cybersecurity experts.
Our framework is built around the following key principles: (i) risk assessment and threat intelligence; (ii) security controls; (iii) incident
response; (iv) employee awareness and training; and (v) third-party risk management. We have integrated our cybersecurity framework
into our broad enterprise risk management processes, which allows us to leverage our existing enterprise-wide experience in managing
risk and adapting to change in the cybersecurity threat landscape.
▪
Risk Assessment and Threat Intelligence: We conduct regular risk assessments to identify potential cybersecurity
vulnerabilities and threats. Our Information Technology (“IT”) Risk Management function, overseen by our Chief Information Security
Officer (“CISO”), leads internal self-assessments, which involve evaluating the security posture of critical systems, networks and
applications as well as the potential impact of cybersecurity threats on our business operations, financial condition and reputation. IT
Risk Management also conducts ongoing threat monitoring and has implemented monitoring systems, including technologies such as
intrusion detection systems, security information and event management tools and threat intelligence programs.
We regularly engage third-party consulting services to conduct audits and assessments of the effectiveness of our cybersecurity controls
and processes and identify areas for improvement based on developments in industry best practices. We also leverage third parties to
evaluate our cybersecurity and risk management strategy, review policies and procedures to address new risks and maintain ongoing
compliance with evolving legal and regulatory requirements. For example, we partner with leading global security providers to leverage
various threat intelligence channels as input to monitor and tune our controls to prevent a cybersecurity attack.
Security Controls: We employ a layered approach to cybersecurity, implementing a range of technical and procedural controls
▪
to protect critical systems and data. These controls include (i) firewalls and intrusion detection and prevention systems to monitor and
block unauthorized access attempts, detect and prevent malicious activity and safeguard network infrastructure, (ii) encryption, including
secure protocols and multi-factor authentication, to protect information in transit and at rest and (iii) secure network architecture that
segregates critical systems from the public internet, limiting exposure to potential threats. We also conduct regular security patching to
manage emerging cyber threats.
Incident Response: We have established an incident response plan and playbooks, which include procedures designed to
▪
respond to and recover from cybersecurity incidents. These procedures, which our IT Risk Management function reviews on an ongoing
basis both internally and with third-party consultants, provide detailed descriptions of the roles and responsibilities of key stakeholders
and the procedures for communication and coordination during an incident. The procedures also provide guidelines for escalating
information to senior management, our Disclosure Controls Committee, our Audit Committee, which, as discussed below, has been
delegated responsibility for our Board’s cybersecurity risk oversight function, and our full Board and for providing timely public
disclosure, when necessary.
To maintain incident readiness and resilience, we conduct periodic disaster recovery exercises and cybersecurity incident management
exercises led by our IT Risk Management function. These exercises involve simulating various scenarios and testing our response
strategies, allowing us to identify vulnerabilities, refine procedures and enhance our overall crisis management and recovery capabilities.
We believe regular practice and evaluation allows us to minimize the impact of potential disruptions and safeguard our operations, data
and reputation.
Employee Awareness and Training: We recognize that employees play a critical role in maintaining a strong cybersecurity
▪
posture. Our Information Governance Policy sets forth the requirements for employee conduct relating to company information and
company-managed devices, including relevant privacy, data security and data retention policies. We believe that our Information
Governance Policy is aligned with industry best practices and applicable legal and regulatory requirements. In addition to our
Information Governance Policy, we conduct regular cybersecurity training programs emphasizing the importance of cybersecurity
awareness. These programs address relevant cybersecurity topics, such as common cybersecurity threats, phishing awareness and best
practices for safeguarding sensitive information. Employees are held accountable for completing all assigned cybersecurity programs
and meeting certain performance thresholds in phishing awareness exercises, and there is a range of consequences for underperformance
that includes termination.
▪
Third-Party Risk Management: We acknowledge the potential cybersecurity risks inherent in our relationships with third-
parties. Accordingly, we have implemented a third-party risk management program to identify and oversee such risks. This program
relies on key elements including risk assessment, due diligence, contractual provisions and ongoing monitoring to identify and mitigate
impacts from high-risk third-parties and of specific risks. We use security risk assessment questionnaire tools to identify high-risk third-
parties, allowing us to effectively assess and mitigate potential security vulnerabilities.
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Our third-party risk assessment framework evaluates the cybersecurity practices and controls of third-parties. For high-risk third-parties,
we perform rigorous due diligence inquiries, reviewing documentation with respect to their security policies, incident response
capabilities, data protection measures and regulatory compliance. We also review evidence of cybersecurity certifications and the results
of independent audits. For high-risk third-parties with access to sensitive data or systems, we conduct more in-depth assessments. Our
contracts with high-risk third-parties contain provisions related to data protection, confidentiality, incident reporting and compliance
with all applicable laws and regulations. Throughout our engagements with high-risk third-parties, we maintain a monitoring program
with respect to their cybersecurity posture. Leveraging tools such as security questionnaires, security ratings and external threat
intelligence, we regularly review and update third-party risk assessments based on changes in the third-party’s services or practices and
the risk landscape.
Governance
Our Board devotes significant time and attention to our cybersecurity and information technology risks. Our Board executes its
cybersecurity risk oversight function as a whole and by delegating responsibility to our Audit Committee. Our CISO and Chief
Information Officer present to our Board annually and to our Audit Committee at least twice each year on a broad range of topics, such
as recent and potential cybersecurity threats and incidents across our industry, best practices and policies, emerging trends, vulnerability
assessments and management’s ongoing efforts to prevent, detect and address internal and external cybersecurity threats specific to us.
These briefings also include periodic third-party cybersecurity program assessments and benchmarks and updates from our cybersecurity
incident management exercises. Cybersecurity risks are documented in an IT Risk Dashboard, which is shared with our Audit
Committee for awareness several times each year. Our full Board also has access to these materials. Finally, we provide periodic
cybersecurity training to our Audit Committee and Board to further cybersecurity awareness and risk oversight.
While our Board and Audit Committee oversee cybersecurity risk, senior management is responsible for actively managing
cybersecurity risk, including by overseeing and executing the risk management strategies discussed above. Our Risk Oversight
Committee, which is chaired by our Chief Compliance Officer and comprised of members of senior management, including our Chief
Financial Officer, Chief Operating Officer, Chief Strategy and Growth Officer and General Counsel, oversees the management of key
enterprise risks, including cybersecurity risks. Senior management reports annually to the Board with respect to our overall enterprise
risk management processes. Our CISO presents to the Risk Oversight Committee quarterly to review the status of management’s key
cybersecurity risk management strategies. The Risk Oversight Committee also receives the quarterly IT Risk Dashboard.
Our CISO is responsible for assessing and managing cybersecurity risks and maintaining our cybersecurity program. Our CISO has over
20 years of experience, including five years as our CISO, managing technology risks across multiple industries, including financial
services, technology and manufacturing. Through strategic hiring and internal development, our CISO increases the levels of skill and
experience on our IT Risk Management team to stay ahead of evolving cybersecurity threats. As of the date of this filing, 94% of our IT
Risk Management team has technical industry certification, and members of the IT Risk Management team have an average of 15 years
of cybersecurity experience. Our CISO currently serves as an advisor to multiple industry groups. Our cybersecurity program
undergoes an annual controls effectiveness assessment and bi-annual program maturity evaluation against industry peers and
consistently receives assessments indicating that it is ahead of the cybersecurity programs of our peer group.
As of the date of this filing, we are not aware of any current cybersecurity threats or cybersecurity incidents that have materially affected
or are reasonably likely to materially affect our business, results of operations or financial condition. For further discussion of the risks
related to cybersecurity, see Item 1A. Risk Factors - Risks Relating to Our Business - Information Technology and Data Privacy Risks.
Item 2. Properties.
ALCS owns one property in Richmond, Virginia that serves as the headquarters facilities for Altria, PM USA, USSTC, Middleton,
Helix, NJOY and certain other subsidiaries.
PM USA owns and operates a manufacturing facility located in Richmond, Virginia that PM USA uses in the manufacturing of
cigarettes (smokeable products segment). PM USA leases portions of this facility to our other subsidiaries for use in the manufacturing
of cigars (smokeable products segment) and MST, snus and oral nicotine pouch products (oral tobacco products segment). In addition,
PM USA owns a research and technology center in Richmond, Virginia that it leases to ALCS.
The oral tobacco products segment has various manufacturing and processing facilities, the most significant of which are located in
Nashville, Tennessee.
The plants and properties owned or leased and operated by us are maintained in good condition and are believed to be suitable and
adequate for present needs.
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Item 3. Legal Proceedings.
The information required by this Item is included in Note 19. Contingencies to our consolidated financial statements in Item 8 (“Note
19”) and Exhibits 99.1 and 99.2 to this Form 10-K. Altria’s consolidated financial statements and accompanying notes for the year
ended December 31, 2023 were filed on Form 8-K on February 1, 2024 (such consolidated financial statements and accompanying notes
are also included in Item 8). The following summarizes certain developments in Altria’s litigation since the filing of the Form 8-K.
Recent Developments
▪
Engle Progeny Trial Results
In Schertzer, in January 2024, the Florida Third District Court of Appeal affirmed the final judgment against PM USA and R.J. Reynolds
Tobacco Company, awarding plaintiff $3 million in compensatory damages plus attorneys’ fees and no punitive damages. We intend to
file post-trial motions and, if necessary, an appeal.
▪ Health Care Cost Recovery Litigation
Settlements of NPM Adjustment Disputes: In February 2024, Idaho joined the multistate settlement, settling adjustment disputes
through 2031 and bringing the total number of states and territories that have joined the multistate settlement to 39. As a result, PM
USA will receive approximately $8 million for 2005 through 2023, $2 million of which relates to the 2021 through 2023 “transition
years.” In connection with this development, PM USA recorded $8 million as a reduction in cost of sales in the first quarter of 2024.
▪
IQOS Litigation
In February 2024, PMI and British American Tobacco p.l.c. agreed to settle multiple ongoing patent infringement disputes, including the
patent infringement action pending before the ITC. Under the terms of the settlement agreement, the parties agreed, among other things,
to request rescission of the limited exclusion order barring the importation of the IQOS System electronic device, Marlboro HeatSticks
and component parts into the United States and the cease and desist order barring domestic sales, marketing and distribution of these
imported products.
▪
Antitrust Litigation
In February 2024, the trial court ordered that two of three direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant
to an arbitration provision in JUUL’s online purchase agreement and dismissed without prejudice all three direct-purchaser plaintiffs’
claims for injunctive relief.
Item 4. Mine Safety Disclosures.
Not applicable.
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Part II
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Equity Securities.
Performance Graph
Performance Graph
The graph below compares the cumulative total shareholder return of our common stock for the last five years with the cumulative total
The graph below compares the cumulative total shareholder return of our common stock for the last five years with the cumulative total
return for the same period of the S&P 500 Index and the S&P Food, Beverage and Tobacco Industry Group Total Return Index. The
return for the same period of the S&P 500 Index and the S&P Food, Beverage and Tobacco Industry Group Total Return Index. The
graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2018 and the
graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2018 and the
reinvestment of all dividends on a quarterly basis.
reinvestment of all dividends on a quarterly basis.
Comparison of Five-Year Cumulative Total Shareholder Return
Comparison of Five-Year Cumulative Total Shareholder Return
Comparison of Five-Year Cumulative Total Shareholder Return
Altria
Altria
Altria
S&P Food, Beverage & Tobacco
S&P Food, Beverage & Tobacco
S&P Food, Beverage & Tobacco
S&P 500
S&P 500
S&P 500
$250
250
250
e
u
l
a
V
x
e
d
n
I
/
a
i
r
t
l
A
$200
200
200
e
e
u
u
l
a
l
a
V
V
x
x
e
$150
e
d
d
n
n
I
I
/
a
/
a
i
r
i
r
t
l
t
l
A
A
$100
150
150
100
100
$50
50
50
2018
2018
2018
2019
2019
2019
2020
2020
2020
2021
2021
2021
2022
2022
2022
2023
2023
2023
Year Ending
Year Ending
Year Ending
S&P Food, Beverage
S&P Food, Beverage
& Tobacco
& Tobacco
Altria
Altria
Date
Date
100.00
December 2018
100.00
December 2018
131.48
December 2019
131.48
December 2019
155.67
December 2020
155.67
December 2020
200.35
December 2021
200.35
December 2021
164.07
December 2022
164.07
December 2022
207.20
December 2023
207.20
December 2023
Sources: FactSet for 2020 to 2023 and Bloomberg “Total Return Analysis” calculated on a daily basis for 2019. Total return assumes reinvestment of
Sources: FactSet for 2020 to 2023 and Bloomberg “Total Return Analysis” calculated on a daily basis for 2019. Total return assumes reinvestment of
dividends as of the ex-dividend date.
dividends as of the ex-dividend date.
100.00
100.00
124.93
124.93
131.88
131.88
153.21
153.21
167.12
167.12
159.90
159.90
100.00
100.00
107.96
107.96
96.75
96.75
120.22
120.22
125.49
125.49
121.00
121.00
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
S&P 500
S&P 500
Market and Dividend Information
Market and Dividend Information
The principal stock exchange on which our common stock (par value $0.33 1/3 per share) is listed is the New York Stock Exchange
The principal stock exchange on which our common stock (par value $0.33 1/3 per share) is listed is the New York Stock Exchange
under the trading symbol “MO”. At February 15, 2024, there were approximately 48,000 holders of record of our common stock.
under the trading symbol “MO”. At February 15, 2024, there were approximately 48,000 holders of record of our common stock.
We have a history of paying cash dividends, and in the first quarter of 2023, established a new progressive dividend goal targeting mid-
We have a history of paying cash dividends, and in the first quarter of 2023, established a new progressive dividend goal targeting mid-
single digits dividend per share growth annually through 2028. Future dividend payments remain subject to the discretion of our Board
single digits dividend per share growth annually through 2028. Future dividend payments remain subject to the discretion of our Board
of Directors.
of Directors.
17
17
17
Issuer Purchases of Equity Securities During the Quarter Ended December 31, 2023
In January 2023, our Board of Directors authorized a $1.0 billion share repurchase program, which we completed in December 2023.
In January 2024, our Board of Directors authorized a new $1.0 billion share repurchase program, which we expect to complete by
December 31, 2024. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and
the program remains subject to the discretion of our Board.
Our share repurchase activity for each of the three months in the period ended December 31, 2023, was as follows:
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Plans or
Programs
Period
Total Number of
Shares Purchased (1)
2,304,352 $
October 1- October 31, 2023
2,135,188 $
November 1- November 30, 2023
2,082,954 $
December 1- December 31, 2023
6,522,494 $
For the Quarter Ended December 31, 2023
(1) The total number of shares purchased includes (a) shares purchased under the January 2023 share repurchase program and (b) shares withheld by
Altria in an amount equal to the statutory withholding taxes for vested stock-based awards previously granted to eligible employees (which totaled
45,289 in October and 1,005 shares in November).
2,259,063 $
2,134,183 $
2,082,954 $
6,476,200
173,083,559
86,542,327
—
Average
Price Paid
Per Share
42.08
40.55
41.55
41.41
Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the other sections of this Form 10-K, including our consolidated financial
statements and related notes contained in Item 8, and the discussion of risk factors that may affect future results in Item 1A.
Additionally, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in
our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the
year ended December 31, 2022 compared to the year ended December 31, 2021, which we filed with the SEC on February 27, 2023 and
is incorporated by reference into this Form 10-K.
In this MD&A section, we refer to the following “adjusted” financial measures: adjusted operating companies income (loss) (“OCI”);
adjusted OCI margins; adjusted net earnings; adjusted diluted earnings per share (“EPS”); and adjusted effective tax rates. We also refer
to the ratio of debt-to-Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization, as defined in our credit
agreement, which includes certain adjustments). These financial measures are not required by, or calculated in accordance with, United
States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other
companies. These financial measures should thus be considered as supplemental in nature and not considered in isolation or as a
substitute for the related financial information prepared in accordance with GAAP. For a further description of these non-GAAP
financial measures, see the Non-GAAP Financial Measures section below.
Executive Summary
Our Business
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision is to responsibly lead the transition of
adult smokers to a smoke-free future. We are Moving Beyond SmokingTM, leading the way in moving adult smokers away from
cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult
tobacco consumers, our businesses and society.
As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to
measure our progress. Our 2028 Goals are:
Corporate
▪
Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from a $4.84 base in 2022;
▪
A progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028;
Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x;
▪
▪ Maintain our leadership position in the U.S. tobacco space; and
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18
▪ Maintain a total adjusted OCI margin of at least 60% in each year through 2028 while investing behind innovative smoke-free
products.
U.S. Smoke-Free Portfolio
▪
▪
Grow U.S. smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028; and
Approximately double our U.S. smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from
innovative smoke-free products.
Long-Term Growth
▪
Compete internationally in the top innovative oral tobacco markets and develop a pathway to participate in heated tobacco and e-
vapor markets; and
Enter non-nicotine categories with broad commercial distribution of at least five products by 2028.
▪
See Operating Results by Business Segment and Liquidity and Capital Resources for additional information on total adjusted OCI
margin and debt-to-Consolidated EBITDA, respectively.
Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products. In combustibles, we own
PM USA, the most profitable U.S. cigarette manufacturer, and Middleton, a leading U.S. cigar manufacturer.
In smoke-free products, we own USSTC, the leading global MST manufacturer, Helix, a leading manufacturer of oral nicotine pouches
and NJOY, currently the only e-vapor manufacturer with market authorizations from the FDA for a pod-based e-vapor product.
Additionally, we have a majority-owned joint venture, Horizon, for the U.S. marketing and commercialization of HTS products and,
through a separate agreement, we have the exclusive U.S. commercialization rights to the IQOS System and Marlboro HeatSticks
through April 2024. As of this filing, there are no products in the U.S. marketplace from the joint venture or exclusive rights agreement.
On June 1, 2023, we acquired NJOY Holdings. For further details, see Note 3. Acquisition of NJOY to our consolidated financial
statements in Item 8 (“Note 3”).
In March 2023, we entered into the Stock Transfer Agreement and, in exchange, we received a non-exclusive, irrevocable global license
to certain of JUUL’s heated tobacco intellectual property.
The brand portfolios of our operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, on! and NJOY. Trademarks
related to Altria referenced in this Form 10-K are the property of Altria or our subsidiaries or are used with permission.
Our investments in equity securities include ABI, the world’s largest brewer, and Cronos, a leading Canadian cannabinoid company.
For a description of Altria, see Item 1. Business of this Form 10-K (“Item 1”).
Trends and Developments
In this MD&A section, we discuss factors that have impacted our business as of the date of this Form 10-K. In addition, we are aware of
and address, in this section and other MD&A sections, certain trends and developments that could, individually or in the aggregate, have
a material impact on our business, including the value of our investments in equity securities, in the future. We focus in this Trends and
Developments section on the cumulative effects of inflation, geopolitical events, recent regulatory actions, supply chain disruptions and
illegal flavored disposable e-vapor products and their effects or potential effects on our business, including impacts on adult tobacco
consumers and their purchasing behaviors.
We continue to monitor the evolving macroeconomic and geopolitical landscapes. While the annual rate of inflation declined during
2023, inflation remains above the Federal Reserve’s target of 2%, which is a key benchmark for the Federal Reserve in determining the
timing and magnitude of changes to the federal funds rate. We continue to observe discretionary income pressures on adult tobacco
consumers as a result of the cumulative effects of inflation and higher consumer debt levels. During 2023, cigarette retail share for the
industry discount segment increased year-over-year. We will continue to monitor the effect of these dynamics on adult tobacco
consumer purchase behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and
adoption of smoke-free products. We expect discretionary income pressures to continue to influence adult tobacco consumers’ purchase
behaviors in 2024. Inflation also has a direct and adverse impact on our direct and indirect costs.
In the e-vapor category, illegal flavored disposable product usage increased in 2023 and currently comprises over 50% of the e-vapor
category. The primary impacts of this trend have been an increase in the rate of cross-category movement among adult cigarette
smokers, contributing to higher than expected domestic cigarette industry volume declines as well as declines in pod-based product
volume within the e-vapor category.
Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our
business. For example, the FDA has submitted for final review proposed product standards regarding menthol in cigarettes and
characterizing flavors in cigars, and the Biden Administration published plans for future potential regulatory actions that include the
FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other
combustible tobacco products. In California, where a ban on flavored nicotine products went into effect in late 2022, we continue to
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19
observe indications of negative unintended consequences of the ban, such as adult tobacco consumer adoption of unregulated products
and the development of illicit markets.
Volatility in domestic and global economies and disruptions in the supply and distribution chains are expected to continue in 2024,
resulting from several factors, including supply and demand imbalances across many commodity sectors, raw materials availability and
geopolitical events. We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics
on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors, the
development of alternative sourcing strategies, entry into long-term supply contracts and prudent oversight of our liquidity.
See Operating Results by Business Segment - Business Environment for additional information on the trends and developments discussed
above.
ABI’s business has been and continues to be impacted by foreign exchange rate fluctuations, inflation and commodity cost headwinds.
We will continue to monitor these conditions and other factors as they could affect our equity earnings and dividends that we receive
from ABI and the fair value of our investment in ABI.
See Note 7 for additional information on our investments in equity securities.
The trends and developments discussed above have not had a material adverse impact on our consolidated financial statements, but we
continue to monitor these trends and developments and potential financial impacts. Additionally, we do not believe that these trends and
developments have materially impacted our ability to achieve our Vision. As the trends and developments discussed above evolve and
new ones emerge, we will continue to evaluate the potential impacts on our business, investments and Vision.
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20
Consolidated Results of Operations
The changes in net earnings and diluted EPS for the year ended December 31, 2023, from the year ended December 31, 2022, were due
primarily to the following:
(in millions, except per share data)
For the year ended December 31, 2022
2022 NPM Adjustment Items
2022 Acquisition, disposition and integration-related items
2022 Tobacco and health and certain other litigation items
2022 JUUL changes in fair value
2022 ABI-related special items
2022 Cronos-related special items
2022 Income tax items
Subtotal 2022 special items
2023 NPM Adjustment Items
2023 Acquisition, disposition and integration-related items
2023 Tobacco and health and certain other litigation items
2023 Loss on disposition of JUUL equity securities
2023 ABI-related special items
2023 Cronos-related special items
2023 Income tax items
Subtotal 2023 special items
Fewer shares outstanding
Change in tax rate
Operations
For the year ended December 31, 2023
2023 Reported Net Earnings
2022 Reported Net Earnings
% Change
2023 Adjusted Net Earnings and Adjusted Diluted EPS
2022 Adjusted Net Earnings and Adjusted Diluted EPS
% Change
$
Net Earnings
5,764
(51)
9
98
1,455
2,010
186
(729)
2,978
38
(26)
(323)
(250)
(70)
(29)
$
Diluted EPS
3.19
(0.03)
—
0.05
0.81
1.12
0.10
(0.40)
1.65
0.02
(0.01)
(0.18)
(0.14)
(0.03)
(0.02)
(32)
(692)
—
33
47
8,130
8,130
5,764
41.0 %
8,822
8,742
0.9 %
$
$
$
$
$
(0.02)
(0.38)
0.07
0.02
0.02
4.57
4.57
3.19
43.3 %
4.95
4.84
2.3 %
$
$
$
$
$
For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of
adjusted earnings and adjusted diluted EPS, see the Consolidated Operating Results section below.
▪
Fewer Shares Outstanding: Fewer shares outstanding were due to shares we repurchased under our share repurchase programs.
▪ Operations: The increase of $47 million in operations (which excludes the impact of special items shown in the table above) was
due primarily to:
▪
▪
▪
higher income from our investments in equity securities, net;
higher OCI; and
lower interest and other debt expense, net;
partially offset by:
▪
▪
lower net periodic benefit income; and
higher amortization of intangible assets (due primarily to the NJOY Transaction).
For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.
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21
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, our management also reviews certain financial results, including
OCI, OCI margins, net earnings and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our
management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt,
restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special
items (including any changes in fair value of our former equity investment in JUUL recorded at fair value), certain income tax items,
charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer
(“NPM”) adjustment disputes under the MSA (“NPM Adjustment Items”). In addition, our management reviews the ratio of debt-to-
Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit
of our Vision. Consolidated EBITDA is calculated in accordance with our credit agreement (defined below in Liquidity and Capital
Resources) and includes certain adjustments. Our management does not view any of these special items to be part of our underlying
results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends
and results. Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our
reported effective tax rate.
Our management believes that the foregoing financial measures provide useful additional insight into underlying business trends and
results, and provide a more meaningful comparison of year-over-year results. Our management uses these financial measures and
regularly provides these to our chief operating decision maker (“CODM”) for planning, forecasting and evaluating business and financial
performance, including allocating resources and evaluating results relative to employee compensation targets. The foregoing financial
measures are not required by, or calculated in accordance with GAAP and may not be calculated the same as similarly titled measures
used by other companies. The foregoing financial measures should thus be considered as supplemental in nature and not considered in
isolation or as a substitute for the related financial information prepared in accordance with GAAP. When we provide a non-GAAP
measure in this Form 10-K, we also provide a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP
financial measure.
Discussion and Analysis
Critical Accounting Estimates
Note 2 includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial
statements. In most instances, we must use an accounting policy or method because it is the only policy or method permitted under
GAAP.
The preparation of financial statements includes the use of estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and
expenses during the reporting periods. If actual amounts are ultimately different from previous estimates, the revisions are included in
our consolidated results of operations for the period in which the actual amounts become known. Historically, the aggregate differences,
if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements.
The following is a review of the more significant assumptions and estimates, as well as the accounting policies and methods, used in the
preparation of our consolidated financial statements:
Revenue Recognition: Our businesses generate substantially all of their revenue from sales contracts with customers. Our
▪
businesses define net revenues as revenues, which include excise taxes and shipping and handling charges billed to customers, net of
cash discounts for prompt payment, sales returns (also referred to as returned goods) and sales incentives. Our businesses exclude from
the transaction price sales taxes and value-added taxes imposed at the time of sale.
Our businesses record sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction to revenues
(a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end of a period) based
principally on historical volume, utilization and redemption rates. We include expected payments for sales incentives in accrued
marketing liabilities on our consolidated balance sheets.
For further discussion, see Note 4. Revenues from Contracts with Customers to our consolidated financial statements in Item 8.
▪
Depreciation, Amortization, Impairment Testing and Asset Valuation: We depreciate property, plant and equipment and
amortize our definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets. We depreciate
machinery and equipment over periods up to 20 years, and buildings and building improvements over periods up to 50 years. We
amortize definite-lived intangible assets over their estimated useful lives up to 25 years.
We review long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in business
circumstances indicate that the carrying value of the assets may not be fully recoverable. We perform undiscounted operating cash flow
analyses to determine if an impairment exists. These analyses are affected by general economic conditions and projected growth rates.
For purposes of recognition and measurement of an impairment for assets held for use, we group assets and liabilities at the lowest level
for which cash flows are separately identifiable. If we determine that an impairment exists, any related impairment loss is calculated
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22
based on fair value. We base impairment losses on assets to be disposed of, if any, on the estimated proceeds to be received, less costs
of disposal. We also review the estimated remaining useful lives of long-lived assets whenever events or changes in business
circumstances indicate the lives may have changed.
We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment, and more frequently if
an event occurs or circumstances change that would require us to perform an interim review. We have the option of first performing a
qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible
asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. If
necessary, we will perform a single step quantitative impairment test. Additionally, we have the option to unconditionally bypass the
qualitative assessment and perform a single step quantitative assessment. If the carrying value of a reporting unit that includes goodwill
exceeds its fair value, which is determined using discounted cash flows, goodwill is considered impaired. We measure the amount of
impairment loss as the difference between the carrying value and the fair value of a reporting unit; however, the amount of the
impairment loss is limited to the total amount of goodwill allocated to a reporting unit. If the carrying value of an indefinite-lived
intangible asset exceeds its fair value, which is determined using discounted cash flows, we consider the intangible asset to be impaired
and reduce the carrying value to fair value in the period identified.
Goodwill by reporting unit and indefinite-lived intangible assets at December 31, 2023 were as follows:
(in millions)
Cigarettes
MST and snus products
Cigars
Oral nicotine pouches
E-vapor
Total
Goodwill
Indefinite-Lived
Intangible Assets
22 $
5,023
77
55
1,614
6,791 $
2
8,801
2,640
—
—
11,443
$
$
During 2023, we completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of
October 1, 2023 and the results of this testing were as follows:
▪
▪
no impairment charges were recorded;
the estimated fair values of the cigarettes, MST and snus products, cigars and oral nicotine pouches reporting units, and the
indefinite-lived intangible assets within these reporting units substantially exceeded their carrying values, with the exception of
the Skoal trademark within the MST and snus products reporting unit. At December 31, 2023, the estimated fair value of the
Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion). MST products, including
Skoal, have continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted
in consumers increasingly moving across tobacco categories. The accelerated growth of innovative tobacco products, including
oral nicotine pouches, and the related increase in competitive activity among tobacco categories in 2023 continued to contribute
to reductions in sales volumes for MST products, including Skoal. We believe if there is further acceleration in the decline in
sales volume for Skoal that results in material revenue declines, there may be a material adverse effect on the significant
assumptions used in performing our valuation, including volume, revenue, income, perpetual growth rate and discount rate. A
hypothetical 1% increase to the discount rate used, our most sensitive assumption, would have resulted in an impairment charge
to the Skoal intangible asset of approximately $150 million during 2023. These adverse effects, including if Skoal’s actual
revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value
or if the discount rate used to estimate the fair value increases, could result in a material non-cash impairment of our Skoal
trademark in future periods, which could have a material adverse effect on our consolidated financial statements; and
▪
as a result of the recent acquisition of NJOY, the fair value of the e-vapor reporting unit approximates its carrying value.
However, we performed a qualitative impairment assessment and concluded that it was more likely than not that the fair value
of the e-vapor reporting unit exceeded its carrying value.
During 2022, our quantitative annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment
charges.
In 2023, we elected to perform a qualitative assessment for certain of our reporting units and indefinite-lived intangible assets. This
qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was
more likely than not that the fair values of our reporting units were below carrying value. For certain of our other reporting units and
indefinite-lived intangible assets, we elected to unconditionally bypass the qualitative assessment and perform a single step quantitative
assessment. We used an income approach to estimate the fair values of our reporting units and indefinite-lived intangible assets. The
income approach reflects the discounting of expected future cash flows to their present value at a rate of return that incorporates the risk-
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free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. The
weighted-average discount rate used in performing the valuations was 10.7%.
In performing the 2023 discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of
which were volume, revenue, income, operating margins, perpetual growth rates and discount rates. The analysis incorporated
assumptions used in our long-term financial forecast, which is used by our management to evaluate business and financial performance,
including allocating resources and evaluating results relative to setting employee compensation targets. The assumptions incorporated
the highest and best use of our indefinite-lived intangible assets and also included perpetual growth rates for periods beyond the long-
term financial forecast. The perpetual growth rates used in performing the valuations ranged from 1% to 2%. Fair value calculations are
sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions outside of our
control.
Although our discounted cash flow analysis is based on assumptions that are considered reasonable and based on the best available
information at the time that the discounted cash flow analysis is developed, there is significant judgment used in determining future cash
flows. The following factors have the most potential to impact our assumptions and thus the expected future cash flows and, therefore,
our impairment conclusions: general macroeconomic conditions; governmental actions, including FDA regulatory actions and inaction;
changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences; success of planned new product
expansions; competitive activity; unfavorable outcomes with respect to litigation proceedings, including actions brought against us
alleging patent infringement; and income and excise taxes. For further discussion of these factors, see Operating Results by Business
Segment - Business Environment below.
While our management believes that the estimated fair values of each reporting unit and indefinite-lived intangible asset at December 31,
2023 are reasonable, actual performance in the short-term or long-term could be significantly different from forecasted performance,
which could result in impairment charges in future periods.
For further discussion of goodwill and other intangible assets, see Note 6.
Investments in Equity Securities: At the end of each reporting period, we review our equity investments accounted for under
▪
the equity method of accounting (ABI and Cronos) for impairment by comparing the fair value of each of our investments to their
carrying value. If the carrying value of an investment exceeds its fair value and the loss in value is other than temporary, we consider
the investment impaired, reduce its carrying value to its fair value and record the impairment in the period identified. We use certain
factors to make this determination, including (i) the duration and magnitude of the fair value decline, (ii) the financial condition and
near-term prospects of the investee and (iii) our intent and ability to hold our investment until recovery to its carrying value.
For further discussion of our investments in equity securities, see Note 7.
▪
Marketing Costs: Our businesses promote their products with consumer incentives, trade promotions and consumer
engagement programs. These consumer incentive and trade promotion activities, which include discounts, coupons, rebates, in-store
display incentives and volume-based incentives, do not create a distinct deliverable and are, therefore, recorded as a reduction of
revenues. We make consumer engagement program payments to third parties. Our businesses expense these consumer engagement
programs, which include event marketing, as incurred and such expenses are included in marketing, administration and research costs in
our consolidated statements of earnings. For interim reporting purposes, our businesses charge consumer engagement programs and
certain consumer incentive expenses to operations as a percentage of sales, based on estimated sales and related expenses for the full
year.
Contingencies: As discussed in Note 19 and Item 3. Legal Proceedings of this Form 10-K (“Item 3”), legal proceedings
▪
covering a wide range of matters are pending or threatened in various U.S. and foreign jurisdictions against Altria and our subsidiaries,
including PM USA, as well as their respective indemnitees. In 1998, PM USA and certain other tobacco product manufacturers entered
into the MSA with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care
cost recovery and other claims. PM USA and certain other U.S. tobacco product manufacturers had previously entered into agreements
to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, “State Settlement Agreements”).
PM USA’s portion of ongoing adjusted payments and legal fees is based on its relative share of the settling manufacturers’ domestic
cigarette shipments, including roll-your-own cigarettes, in the year preceding that in which the payment is due. In addition, PM USA,
Middleton and USSTC are subject to quarterly user fees imposed by the FDA as a result of the FSPTCA. Payments under the State
Settlement Agreements and the FDA user fees are based on variable factors, such as volume, operating income, market share and
inflation, depending on the subject payment. Our subsidiaries account for the cost of the State Settlement Agreements and FDA user
fees as a component of cost of sales. Our subsidiaries recorded approximately $4.0 billion and $4.2 billion of charges to cost of sales for
the years ended December 31, 2023 and 2022, respectively, in connection with the State Settlement Agreements and FDA user fees.
We record provisions in our consolidated financial statements for pending litigation when we determine that an unfavorable outcome is
probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable
outcome in a case may occur, except to the extent discussed in Note 19 and Item 3: (i) management has concluded that it is not probable
that a loss has been incurred in any pending litigation; (ii) management is unable to estimate the possible loss or range of loss that could
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result from an unfavorable outcome in any pending case; and (iii) accordingly, management has not provided any amounts in our
consolidated financial statements for unfavorable outcomes, if any. We expense litigation defense costs as incurred and include such
costs in marketing, administration and research costs in our consolidated statements of earnings.
▪
Employee Benefit Plans: We provide a range of benefits to certain employees and retired employees, including pension,
postretirement health care and postemployment benefits. We record annual amounts relating to these plans based on calculations
specified by GAAP, which include various actuarial assumptions as to discount rates, assumed rates of return on plan assets, mortality,
compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis and
make modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. Any effect of the
modifications is generally amortized over future periods.
We recognize the funded status of our defined benefit pension and other postretirement plans on the consolidated balance sheets and
record as a component of other comprehensive earnings (losses), net of deferred income taxes, the gains or losses and prior service costs
or credits that have not been recognized as components of net periodic benefit cost (income). We subsequently amortize the gains or
losses and prior service costs or credits recorded as components of other comprehensive earnings (losses) into net periodic benefit cost
(income) in future years.
Due to changes in market factors, our discount rate assumptions for our pension and postretirement plans obligations decreased to 5.3%
and 5.2%, respectively, at December 31, 2023 from 5.6% for these plans at December 31, 2022. We presently anticipate net pre-tax
pension and postretirement income of approximately $50 million in 2024 versus net pre-tax income of $73 million in 2023. This
decrease is due primarily to: (i) lower expected income on plan assets; and (ii) higher amortization of net unrecognized losses in 2024;
partially offset by (iii) lower discount rates resulting in lower interest costs. Assuming no change to the shape of the yield curve, a 50
basis point decrease (increase) in our discount rates would increase (decrease) our pension and postretirement expense by approximately
$10 million. Similarly, a 50 basis point decrease (increase) in the expected return on plan assets would increase (decrease) our pension
and postretirement expense by approximately $40 million.
For additional information see Note 17. Benefit Plans to our consolidated financial statements in Item 8 (“Note 17”).
Income Taxes: Significant judgment is required in determining income tax provisions and in evaluating tax positions. We
▪
determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities,
using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when it is
more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of deferred tax
assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the character of
the assets and the possible sources of taxable income of the appropriate character within the available carryback and carryforward
periods available under the tax law.
We recognize the financial statement benefit for uncertain income tax positions when it is more likely than not, based on the technical
merits, that the position will be sustained upon examination by taxing authorities. The amount recognized is measured as the largest
amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize accrued interest and penalties
associated with uncertain tax positions as part of the provision for income taxes in our consolidated statements of earnings.
We recognized income tax benefits and charges in the consolidated statements of earnings during 2023 and 2022 as a result of various
tax events.
For additional information on income taxes, see Note 15. Income Taxes to our consolidated financial statements in Item 8 (“Note 15”).
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Consolidated Operating Results
(in millions)
Net Revenues:
Smokeable products
Oral tobacco products
All other
Net revenues
Excise Taxes on Products:
Smokeable products
Oral tobacco products
Excise taxes on products
Operating Income:
OCI:
Smokeable products
Oral tobacco products
All other
Amortization of intangibles
General corporate expenses
Operating income
For the Years Ended December 31,
2023
2022
$
$
$
$
$
$
21,756
$
2,667
60
24,483
3,869
112
3,981
10,670
1,722
(74)
(128)
(643)
11,547
$
$
$
$
$
22,476
2,580
40
25,096
4,289
119
4,408
10,688
1,632
(36)
(73)
(292)
11,919
As discussed further in Note 16, our CODM reviews OCI, which is defined as operating income before general corporate expenses and
amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments. Our management believes it is
appropriate to disclose this measure to help investors analyze our business performance and trends.
The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the years ended December 31:
(in millions of dollars, except per share data)
2023 Reported
NPM Adjustment Items
Acquisition, disposition and integration-related items
Tobacco and health and certain other litigation items
Loss on disposition of JUUL equity securities
ABI-related special items
Cronos-related special items
Income tax items
2023 Adjusted for Special Items
2022 Reported
NPM Adjustment Items
Acquisition, disposition and integration-related items
Tobacco and health and certain other litigation items
JUUL changes in fair value
ABI-related special items
Cronos-related special items
Income tax items
2022 Adjusted for Special Items
Earnings
before Income
Taxes
Provision for
Income
Taxes
Net Earnings Diluted EPS
$
10,928 $
2,798 $
8,130 $
4.57
(50)
35
430
250
89
29
—
(12)
9
107
—
19
—
(32)
(38)
26
323
250
70
29
32
11,711 $
2,889 $
8,822 $
(0.02)
0.01
0.18
0.14
0.03
0.02
0.02
4.95
7,389 $
1,625 $
5,764 $
3.19
$
$
(68)
11
131
1,455
2,544
186
—
(17)
2
33
—
534
—
729
(51)
9
98
1,455
2,010
186
(729)
$
11,648 $
2,906 $
8,742 $
(0.03)
—
0.05
0.81
1.12
0.10
(0.40)
4.84
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The following special items affected the comparability of statements of earnings amounts.
▪
Care Cost Recovery Litigation in Note 19 and NPM Adjustment Items in Note 16, respectively.
NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health
▪
disposition-related interest income for the year ended December 31, 2023, see Note 3 and Note 6, respectively.
Acquisition, Disposition and Integration-Related Items: For a discussion of acquisition and integration-related costs and
▪
Tobacco and Health and Certain Other Litigation Items: For a discussion of tobacco and health and certain other litigation
items and a breakdown of these costs by segment, see Note 19 and Tobacco and Health and Certain Other Litigation Items in Note 16,
respectively.
▪
Loss on Disposition and Changes in Fair Value of JUUL Equity Securities: We recorded a non-cash, pre-tax loss of
$250 million related to the disposition of our former investment in JUUL for the year ended December 31, 2023 as (income) losses from
investments in equity securities in our consolidated statement of earnings.
We recorded non-cash, pre-tax unrealized losses of $1,455 million for the year ended December 31, 2022, as (income) losses from
investments in equity securities in our consolidated statement of earnings as a result of decreases in the estimated fair value of our
former investment in JUUL.
We recorded corresponding adjustments to the JUUL tax valuation allowance in 2023 and 2022.
For further discussion, see Note 7 and Note 15.
ABI-Related Special Items: We recorded net pre-tax losses of $89 million from our equity investment in ABI for the year
▪
ended December 31, 2023, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share
commitments and a loss on ABI’s sale of certain brands and associated assets in the United States.
We recorded net pre-tax losses of $2,544 million from our equity investment in ABI for the year ended December 31, 2022, substantially
all of which related to our non-cash impairment of our equity investment in ABI. For further discussion, see Note 7.
The ABI-related special items include our respective share of the amounts recorded by ABI and additional adjustments related to (i) the
conversion of ABI-related special items from international financial reporting standards to GAAP and (ii) adjustments to our investment
required under the equity method of accounting.
▪
of the following:
Cronos-Related Special Items: We recorded net pre-tax expense for the years ended December 31, 2023 and 2022, consisting
(in millions)
Loss on Cronos-related financial instruments
(Income) losses from investments in equity securities (1)
Total Cronos-related special items - (income) expense
2023
2022
$
$
— $
29
29 $
15
171
186
(1) Amounts include our share of special items recorded by Cronos and additional adjustments, if required under the equity method of accounting,
related to our investment in Cronos including our $107 million non-cash pre-tax impairment of our investment in Cronos in 2022.
We recorded corresponding adjustments to the Cronos tax valuation allowance in 2023 and 2022 relating to the special items.
For further discussion, see Note 7 and Note 15.
▪
primarily to tax expense associated with a tax basis adjustment related to our investment in ABI.
Income Tax Items: We recorded expense of $32 million for income tax items for the year ended December 31, 2023, due
We recorded income of $729 million for income tax items for the year ended December 31, 2022, due primarily to tax benefits
associated with the release of valuation allowances on deferred tax assets related to a portion of our former investment in JUUL and our
Cronos warrant (which we irrevocably abandoned in 2022) due to the anticipated ability to utilize these losses. For further discussion,
see Note 15.
2023 Compared with 2022
Net revenues, which include excise taxes billed to customers, decreased $613 million (2.4%), due primarily to lower net revenues in the
smokeable products segment, partially offset by higher net revenues in the oral tobacco products segment.
Cost of sales decreased $224 million (3.5%), due primarily to lower shipment volume in our smokeable products segment, partially
offset by higher per unit settlement charges, higher manufacturing costs and lower NPM Adjustment Items in our smokeable products
segment.
Excise taxes on products decreased $427 million (9.7%), due primarily to lower shipment volume in our smokeable products segment.
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Marketing, administration and research costs increased $410 million (17.6%), due primarily to higher general corporate expenses, which
included charges related to agreements in 2023 to resolve certain JUUL-related litigation and shareholder derivative lawsuits as
discussed in Note 19, and acquisition-related costs and higher amortization of intangible assets both associated with the NJOY
Transaction.
Operating income decreased $372 million (3.1%), due primarily to higher general corporate expenses and higher amortization of
intangible assets, partially offset by higher operating results in our oral tobacco products segment.
Interest and other debt expense, net decreased $69 million (6.5%), due primarily to higher interest income including higher rates, the sale
of the IQOS System commercialization rights and favorable NPM Adjustment Items and lower interest expense due to net changes in
debt, partially offset by 2023 interest expense and fees for the term loan facility associated with the NJOY Transaction. For additional
information related to the term loan facility and the sale of the IQOS System, see Liquidity and Capital Resources.
Net periodic benefit income, excluding service cost, decreased by $57 million (31.0%), due to higher discount rates resulting in higher
interest costs and lower estimated return on assets due to lower fair value of plan assets at December 31, 2022, partially offset by lower
amortization of net unrecognized losses in 2023. For additional information, see Note 17.
(Income) losses from investments in equity securities, which were favorable $3,884 million (100%+), were positively impacted by
favorable results from our equity investment in ABI (due primarily to our non-cash impairment of our investment in ABI in 2022), lower
charges related to our former investment in JUUL equity securities and lower losses from our Cronos-related special items.
Provision for income taxes increased $1,173 million (72.2%), due primarily to lower pre-tax earnings in 2022 associated with our non-
cash impairment of our investment in ABI and the release of valuation allowances in 2022 on deferred tax assets related to a portion of
our former investment in JUUL.
Reported net earnings of $8,130 million increased $2,366 million (41.0%), due primarily to favorable results from our investments in
equity securities and lower interest and other debt expense, net, partially offset by lower operating income, unfavorable income tax items
and lower net periodic benefit income. Reported basic and diluted EPS of $4.57, each increased by 43.3%, due to higher reported net
earnings and fewer shares outstanding.
Adjusted net earnings of $8,822 million increased $80 million (0.9%), due primarily to higher income from our investments in equity
securities, higher OCI, lower adjusted tax rate and lower interest and other debt expense, net, partially offset by lower net periodic
benefit income and higher amortization. Adjusted diluted EPS of $4.95 increased by 2.3%, due to higher adjusted net earnings and
fewer shares outstanding.
Operating Results by Business Segment
Business Environment
Summary
The U.S. tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to
materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision.
These challenges, some of which are discussed in more detail in Note 19, Item 1A and Item 3, include:
▪
▪
▪
▪
▪
▪
▪
▪
pending and threatened litigation and bonding requirements;
restrictions and requirements imposed by the FSPTCA, and restrictions and requirements (and related enforcement actions) that
have been, and in the future will be, imposed by the FDA;
the FDA’s failure to effectively address illegal e-vapor products on the market;
actual and proposed excise tax increases, as well as changes in tax structures and tax stamping requirements;
bans and restrictions on tobacco use imposed by governmental entities and private establishments and employers;
other federal, state and local government actions, including:
▪
▪
▪
▪
restrictions on the sale of certain tobacco products, the sale of tobacco products by certain retail establishments, the sale of
tobacco products with characterizing flavors and the sale of tobacco products in certain package sizes;
additional restrictions on the advertising and promotion of tobacco products;
other actual and proposed tobacco-related legislation and regulation; and
governmental investigations;
reductions in consumption levels of cigarettes and MST products;
increased efforts by tobacco control advocates and other private sector entities (including retail establishments) to further
restrict the availability and use of tobacco products or the ability to communicate with consumers through third-party digital
platforms;
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▪
▪
▪
▪
changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic
conditions (including inflation), excise taxes and price gap relationships, each of which may result in adult tobacco consumers
switching to lower-priced tobacco products and lower shipment volumes;
the highly competitive nature of all tobacco categories, including competitive disadvantages related to the impact on cigarette
prices due to the settlement of certain healthcare cost recovery litigation and the proliferation of innovative tobacco products,
such as e-vapor and oral nicotine pouch products;
illicit trade in tobacco products, including illegal e-vapor products; and
potential adverse changes in prices, availability and quality of tobacco, other raw materials and component parts, including as a
result of changes in macroeconomic and geopolitical conditions.
In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco
industry, including negatively impacting cigarette and MST shipment volumes. We believe that a significant number of adult tobacco
consumers switch among tobacco categories, use multiple forms of tobacco products and try innovative tobacco products, such as e-
vapor products and oral nicotine pouches. Adult smokers continue to transition from cigarettes to exclusive use of smoke-free tobacco
product alternatives, which aligns with our Vision.
We work to meet these evolving adult tobacco consumer preferences over time by developing, manufacturing, marketing and
distributing products both within and outside the United States through innovation and other growth strategies (including, where
appropriate, arrangements with, or investments in, third parties and acquisitions).
For the fourth quarter of 2023, we estimate that, when adjusted for trade inventory movements, calendar differences and other factors,
domestic cigarette industry volume declined by 8% versus the fourth quarter of 2022 and over the last 12 months. We believe these
declines primarily are attributable to the historic secular rate of decline, the growth of illegal flavored disposable e-vapor products and
continued macroeconomic pressures on adult tobacco consumers. We continue to estimate that the growth of illegal flavored disposable
e-vapor products, which we discuss in more detail below, contributed to cigarette industry volume declines in a range of 1.5% to 2.5%
over the last 12 months. By design, these illegal flavored disposable e-vapor products are largely distributed through non-traditional,
untracked retail channels, and this is a trend we will continue to carefully monitor.
The macroeconomic pressures on adult tobacco consumers and seasonal trends in the discount segment influenced discount share
performance. For the fourth quarter of 2023, the discount share of the cigarette category was 28.6%, an increase of 0.4 share points
sequentially versus the third quarter of 2023 and an increase of 0.9 share points versus the fourth quarter of 2022. For the full year 2023,
the discount segment share of the cigarette category grew to 28.3%, an increase of 1.4 share points versus the full year 2022.
Marlboro share was 42.2% in the fourth quarter of 2023, reflecting a decrease of 0.1 share point as compared to the third quarter of 2023
and unchanged from the fourth quarter of 2022. For the full year 2023, Marlboro share was 42.1%, a decrease of 0.4 share points
compared to the full year 2022. Marlboro continued to increase share in the premium segment of the industry to 59.2% in the fourth
quarter of 2023, an increase of 0.3 share points versus the third quarter of 2023 and an increase of 0.8 share points versus the fourth
quarter of 2022.
We expect cigarette industry volume trends for 2024 to be most influenced by (i) continued macroeconomic and discretionary income
pressures for adult tobacco consumers (including inflation, gasoline prices and unemployment levels), (ii) cross-category movement,
including to illegal e-vapor products, and (iii) regulatory and legislative (including excise tax) developments.
The U.S. nicotine pouch category continued to grow significantly throughout the fourth quarter of 2023 to 35.9% of the U.S. oral
tobacco category, an increase of 11.8 share points versus the fourth quarter of 2022. on! maintained year over year share momentum
through the full year 2023 to achieve 6.8% of the total oral tobacco category, an increase of 1.8 share points versus the full year 2022.
For the fourth quarter of 2023, on! share was 6.9% of the total oral tobacco category, an increase of 1.1 share points when compared to
the fourth quarter of 2022 and unchanged sequentially. Oral nicotine pouch growth primarily has sourced from adult smokeless tobacco
and cigarette consumers, negatively impacting smokeless and cigarette product volumes. For the fourth quarter 2023, the traditional
smokeless category (including MST and Snus) share of the total oral tobacco category declined to 64.1%, down 11.8 share points versus
the fourth quarter of 2022. Copenhagen had an oral tobacco category share of 21.7% for the fourth quarter of 2023, a decrease of 4.5
share points when compared to the fourth quarter of 2022.
The e-vapor category grew approximately 35% in 2023, driven by illicit flavored disposable products, which currently represent over
50% of the e-vapor category. Pod-based products represent between 15% and 20% of the category and declined approximately 15% in
2023 versus 2022. For the fourth quarter of 2023, reported shipment volume of NJOY ACE was approximately 10.4 million pods. By
December 2023, NJOY ACE distribution grew to approximately 75,000 stores, and NJOY ACE is currently distributed in the top 25
convenience store chains by e-vapor volume. The NJOY share of the e-vapor category reached 3.7% in the fourth quarter of 2023, an
increase of 0.3 share points sequentially.
Despite improving macroeconomic conditions, discretionary income pressures persisted for adult tobacco consumers through the fourth
quarter of 2023 due to the cumulative effect of inflation and pressure on discretionary income. In January 2023, the consumer price
index (“CPI”) was 6.4%, seasonally unadjusted, significantly below the prior year peak of 9.1% in June 2022 but exceeding the Federal
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Reserve’s target of 2%. In total, between 2022 and 2023, the Federal Reserve took 11 consecutive rate increases to move interest rates
to a range of 5.25% to 5.5% by July 2023. In response to rising interest rates through the year, inflation continued to ease sequentially to
a December 2023 rate of 3.4%. Despite recent CPI declines, tobacco product price increases over time have continued to act as a
headwind for adult tobacco consumers. Similar to inflation trends, gas prices throughout 2023 were much lower than 2022. However,
they remained consistently above $3.00 month over month. The average gas price for 2023 was $3.52 per gallon, a decrease of $0.44
compared to the previous year. Gas prices peaked leading into August to $3.84, then started to decrease, reaching the lowest levels in
over two years to $3.13 by December 2023. In addition, low unemployment and stable wage inflation continued through 2023.
We continue to monitor changing conditions within the tobacco business environment and impacts on our business. For example, we
monitor changes in macroeconomic conditions that increase discretionary income pressures on adult tobacco consumers, which can
impact domestic cigarette industry volume decline and discount segment share growth and reduce purchases at retail. We are also
monitoring growth of illegal flavored disposable e-vapor products and the related negative impact on domestic cigarette and e-vapor
industry volumes. In addition, the growth of the nicotine pouch category has reduced the size of the MST category and could impact the
carrying value of our assets such as our tobacco product trademarks. Changes in these and other conditions could have a material
adverse effect on our business, results of operations, cash flows or financial position.
FSPTCA and FDA Regulation
▪
tobacco products and, among other provisions:
The Regulatory Framework: The FSPTCA and its related regulations establish broad FDA regulatory authority over all
▪
▪
▪
▪
▪
impose restrictions on the advertising, promotion, sale and distribution of tobacco products (see Final Tobacco Marketing
Rule below);
establish pre-market review pathways for new and modified tobacco products (see Pre-Market Review Pathways for
Tobacco Products and Market Authorization Enforcement below);
prohibit any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without
FDA authorization;
authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health (see
Potential Product Standards below); and
equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product
manufacturing and other facilities (see Investigation and Enforcement below).
The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly
authorized by the FDA. In connection with a 2016 lawsuit initiated by Middleton, the U.S. Department of Justice, on behalf of the FDA,
informed Middleton that the FDA does not intend to bring an enforcement action against Middleton for the use of the term “mild” in the
trademark “Black & Mild.” Consequently, Middleton dismissed its lawsuit without prejudice. If the FDA were to change its position at
some later date, Middleton would have the opportunity to bring another lawsuit.
Effective April 2022, the U.S. Congress expanded the statutory definition of tobacco products to include products containing nicotine
derived from any source, including synthetic nicotine. See Pre-Market Review Pathways for Tobacco Products and Market
Authorization Enforcement below for additional information on the effects of the statutory change.
Final Tobacco Marketing Rule: As required by the FSPTCA, in March 2010, the FDA promulgated a wide range of
▪
advertising and promotion restrictions for cigarettes and smokeless tobacco(1) products (the “Final Tobacco Marketing Rule”). The May
2016 deeming regulations amended the Final Tobacco Marketing Rule to expand specific provisions to all tobacco products, including
cigars, pipe tobacco and e-vapor and oral nicotine products containing tobacco-derived nicotine or other tobacco derivatives.
The Final Tobacco Marketing Rule, as amended, among other things:
▪
▪
▪
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restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;
prohibits sampling of all tobacco products except that sampling of smokeless tobacco products is permitted in qualified
adult-only facilities;
prohibits the sale or distribution of items such as hats and tee shirts with cigarette or smokeless tobacco brands or logos;
prohibits cigarettes and smokeless tobacco brand name sponsorship of any athletic, musical, artistic or other social or
cultural event, or any entry or team in any event; and
requires the development by the FDA of graphic warnings for cigarettes, establishes warning requirements for other
tobacco products, and gives the FDA the authority to require new warnings for any type of tobacco product (see FDA
Regulatory Actions - Graphic Warnings below).
(1) “Smokeless tobacco,” as used in this section of this Form 10-K, refers to smokeless tobacco products first regulated by the FDA in 2009, including
MST. It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.
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Subject to certain limitations arising from legal challenges, the Final Tobacco Marketing Rule took effect in June 2010 for cigarettes and
smokeless tobacco products, in August 2016 for all other tobacco products, including e-vapor and oral nicotine pouch products
containing tobacco-derived nicotine, and in April 2022 for tobacco products, including e-vapor and oral nicotine pouch products, that
contain nicotine from any source other than tobacco, such as synthetic nicotine.
Rulemaking and Guidance: From time to time, the FDA issues proposed regulations and guidance, which may be issued in
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draft or final form, that generally involve public comment and may include scientific review. The FDA also may request comments on
broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”). We actively engage with the FDA to develop and
implement the FSPTCA’s regulatory framework, including submission of comments to various FDA policies and proposals and
participation in public hearings and engagement sessions.
The FDA’s implementation of the FSPTCA and related regulations and guidance also may have an impact on enforcement efforts by
states, territories and localities of their laws and regulations as well as of the State Settlement Agreements (see State Settlement
Agreements below). Such enforcement efforts may adversely affect our operating companies’ ability to market and sell tobacco products
in those states, territories and localities.
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FDA’s Five-Year Strategic Plan for Tobacco and Nicotine Regulation: In December 2023, in response to the Reagan-Udall
Foundation’s report of its operational evaluation of the FDA’s Center for Tobacco Products, the FDA released its five-year strategic plan
to address concerns raised by the report. The Reagan-Udall Report urged the FDA to clearly define product pathways, accelerate PMTA
decision-making, address the need for health risk communications to tobacco consumers and take enforcement actions against
manufacturers and products that violate the law.
The FDA’s five-year strategic plan lists five goals:
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develop, advance and communicate comprehensive and impactful tobacco regulations and guidance;
ensure timely, clear and consistent product application review;
strengthen compliance of regulated industry using all available tools, including robust enforcement actions;
enhance knowledge and understanding of the risks associated with tobacco product use; and
advance operational excellence.
Although the FDA, in conjunction with other federal entities, has increased enforcement activity, prior insufficient enforcement actions
against certain product categories that violate the law, including disposable and flavored e-vapor products and products targeted to
minors, allowed such products to proliferate on the market. In addition, the FDA’s failure to clearly define product pathways and
accelerate PMTA decision making has resulted in a market with few authorized smoke-free products available to adult tobacco
consumers.
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Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement: The FSPTCA permits the
sale of tobacco products on the market as of February 15, 2007 and not subsequently modified (“Pre-existing Tobacco Products”) and
new or modified products authorized through the PMTA, Substantial Equivalence (“SE”) or SE Exemption pathways. Subsequent FDA
rules also provide a Supplemental PMTA pathway designed to increase the efficiency of submission and review for modified versions of
previously authorized products.
The FDA pre-market authorization enforcement policy varies based on product type and date of availability on the market, specifically:
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Pre-existing Tobacco Products are exempt from the pre-market authorization requirement;
cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007
and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by
March 22, 2011. These reports must demonstrate that the product has the same characteristics as a product on the market
as of February 15, 2007 or to a product previously determined to be substantially equivalent, or has different characteristics
but does not raise different questions of public health;
tobacco products that were first regulated by the FDA in 2016, including cigars, e-vapor products and oral nicotine pouches
that are not Pre-existing Tobacco Products, are generally products for which either an SE report or PMTA needed to be
filed by September 9, 2020; and
tobacco products containing nicotine from any source other than tobacco (e.g., synthetic nicotine) that were on the market
between March 15, 2022 and April 14, 2022 and are not Pre-existing Tobacco Products are generally products for which a
manufacturer must have filed a PMTA by May 14, 2022. A manufacturer was permitted to keep such a product on the
market until July 13, 2022 provided that a PMTA was filed by May 14, 2022. Thereafter, unless the FDA granted the
product a marketing order, the product is unlawful and subject to possible FDA enforcement.
Modifications to currently marketed products, including modifications that result from, for example, changes to the quantity of tobacco
product(s) in a package, a manufacturer being unable to acquire ingredients or a supplier or contract manufacturer being unable to
maintain the consistency required in ingredients or manufacturing processes, could trigger the FDA’s pre-market review processes.
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Additionally, a manufacturer may be unable to maintain consistency in manufacturing processes as it increases the scale of its
manufacturing operations in response to market expansion or product introduction. These circumstances could cause a manufacturer to
receive (i) a “not substantially equivalent” determination or (ii) a denial or withdrawal of a PMTA, either of which could result in a
product being removed from the market. In addition, new scientific data continues to be developed relating to innovative tobacco
products, which could impact the FDA’s determination as to whether a product is, or continues to be, appropriate for the protection of
public health and could, therefore, result in the removal of one or more products from the market. Any such actions affecting our
operating companies’ products could have a material adverse impact on our business, results of operations, cash flows or financial
position.
Products Regulated in 2009: Most cigarette and smokeless tobacco products currently marketed by PM USA and USSTC are
“Provisional Products.” PM USA and USSTC timely submitted SE reports for these Provisional Products and have received SE
determinations on certain Provisional Products. Those products that were found by the FDA to be not substantially equivalent (certain
smokeless tobacco products) had been discontinued for business reasons prior to the FDA’s determinations; therefore, those
determinations did not impact business results. PM USA and USSTC have other Provisional Products that continue to be subject to the
FDA’s pre-market review process. In the meantime, they can continue marketing these products unless the FDA determines that a
specific Provisional Product is not substantially equivalent.
In addition, the FDA has communicated that it will not review a certain subset of Provisional Product SE reports and that the products
that are the subject of those reports can continue to be legally marketed without further FDA review. PM USA and USSTC have
Provisional Products included in this subset of products.
While we believe PM USA’s and USSTC’s current Provisional Products meet the statutory requirements of the FSPTCA, we cannot
predict how the FDA will ultimately apply law, regulation and guidance to their various SE reports. Should PM USA or USSTC receive
unfavorable determinations on any SE reports currently pending with the FDA, we believe PM USA and USSTC can replace the vast
majority of these product volumes with other FDA authorized products or with Pre-existing Tobacco Products.
Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products”
and must receive a marketing order from the FDA prior to being offered for sale. Marketing orders for Non-Provisional Products may
be obtained by filing an SE report, PMTA or using another pre-market pathway established by the FDA. PM USA and USSTC may not
be able to obtain a marketing order for non-provisional products because the FDA may determine that any such product does not meet
the statutory requirements for approval.
Products Regulated in 2016: Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and
e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or PMTA by
the filing deadline of September 9, 2020 in order for their products to remain on the market. These products can remain on the market
during FDA review through court-allowed, case-by-case discretion, so long as the report or application was timely filed with the FDA.
In September 2022, the FDA represented that it had resolved more than 99% of the timely applications it had received, the vast majority
of which were for e-vapor products and resulted in denials. A number of the denials are subject to challenges initiated by the affected
manufacturers. For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued
marketing and sale of those products pursuant to its case-by-case discretion. For products (new or modified) not on the market as of
August 8, 2016, manufacturers must file an SE report or PMTA and receive FDA authorization prior to marketing and selling the
product.
Helix submitted PMTAs for on! oral nicotine pouches in May 2020. As of February 23, 2024, the FDA has not issued marketing order
decisions for any on! products. In addition, as of February 23, 2024, Middleton has received market orders or exemptions that cover
over 99% of its cigar product volume.
In April 2019, the FDA authorized the PMTA for the IQOS System, and in July 2020, the FDA authorized the marketing of this system
as a modified risk tobacco product (“MRTP”) with a reduced exposure claim. In December 2020, the FDA authorized the PMTA for
IQOS 3, an updated version of the IQOS devices, and in March 2022 authorized the marketing of the IQOS 3 device as an MRTP with
the same reduced exposure claim. In January 2023, the FDA authorized PMTAs for three new tobacco-flavored varieties of Marlboro
HeatSticks.
In September 2021, in connection with a patent dispute, the ITC issued a cease and desist order, effective as of November 29, 2021,
banning (i) the importation of the IQOS devices, Marlboro HeatSticks and infringing components into the United States and (ii) the sale,
marketing and distribution of such imported products in the United States. As a result, PM USA removed the products from the
marketplace. For a further discussion of the ITC decision, see Note 19. In October 2022, we agreed to assign the exclusive U.S.
commercialization rights to the IQOS System to PMI effective April 2024 in exchange for a total cash payment of approximately $2.7
billion (plus interest). The U.S. government has asserted that the agreement to assign those rights required district court approval and
was subject to PMI becoming bound by a court-ordered injunction against engaging in certain conduct and requiring the communication
of corrective statements. The issue has yet to be litigated before the district court.
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In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and
Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed innovative products.
These products are not currently marketed or sold.
In March 2023, the FDA authorized USSTC to communicate a modified risk claim about its Copenhagen Classic Snuff MST product.
This product is not currently marketed or sold. The authorized claim for Copenhagen Classic Snuff is “IF YOU SMOKE, CONSIDER
THIS: Switching completely to this product from cigarettes reduces risk of lung cancer.” USSTC’s authorization to use this claim is
subject to the FDA’s post-market surveillance requirements described below.
In June 2023, we completed our acquisition of NJOY Holdings, the parent of NJOY. As a result of the acquisition, NJOY became a
wholly owned subsidiary of Altria, and we gained full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE,
currently the only pod-based e-vapor product with market authorizations from the FDA, and NJOY DAILY, which also has a market
authorization. In March 2020, NJOY submitted PMTAs to the FDA with respect to two NJOY ACE menthol products and two NJOY
DAILY menthol products, all four of which remain pending. The FDA issued marketing denial orders (“MDOs”) for four NJOY ACE
and four NJOY DAILY flavored products. NJOY filed for a supervisory review by the FDA of the marketing denial orders for the NJOY
ACE and NJOY DAILY flavored products, all of which are pending.
Post-Market Surveillance: Manufacturers that receive product authorizations through the PMTA process must adhere to the FDA post-
market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule that went into effect in
November 2021. The requirements include prior notification of marketing activities. The FDA may amend requirements of a market
order or withdraw the market order based on this information if, among other reasons, it determines that the continued marketing of the
products is no longer appropriate for the protection of the public health.
Effect of Adverse FDA Determinations: FDA review time frames have varied. It is therefore difficult to predict the duration of FDA
reviews of SE reports or PMTAs. An unfavorable determination on an application, the withdrawal by the FDA of a prior marketing
order or other changes in FDA regulatory requirements could result in the removal of products from the market. A “not substantially
equivalent” determination, a denial of a PMTA or a marketing order withdrawal by the FDA on one or more products (which would
require the removal of the product or products from the market) could have a material adverse impact on our business, results of
operations, cash flows or financial position. Also, adverse FDA determinations on innovative tobacco products could have a material
adverse effect on our ability to achieve our Vision.
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FDA Regulatory Actions
Graphic Warnings: In March 2020, the FDA issued a final rule requiring 11 textual warnings accompanied by color graphics
depicting certain negative health consequences of smoking on cigarette packaging and advertising. PM USA and other
cigarette manufacturers filed lawsuits challenging the final rule on substantive and procedural grounds. In December 2022, the
U.S. District Court for the Eastern District of Texas found in favor of cigarette manufacturers in one such suit and blocked the
rule, finding it unconstitutional on the basis that it compelled speech in violation of the First Amendment. The FDA has
appealed the decision.
Underage Access and Use of Certain Tobacco Products: The FDA announced regulatory actions in September 2018 to address
underage access and use of e-vapor products. We have engaged with the FDA on this topic and have reaffirmed to the FDA our
ongoing and long-standing commitment to preventing underage use. For example, we advocated raising the minimum legal age
to purchase all tobacco products to 21 at the federal and state levels to further address underage use, which is now federal law.
We continue to advocate in states that have not yet raised the minimum legal age to purchase all tobacco products to 21. See
Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products below for further discussion.
Additionally, the FDA issued final guidance in April 2020, stating that it intended to prioritize enforcement action against
certain product categories, including pod-based, flavored e-vapor products and products targeted to minors. More recently, the
FDA has taken limited enforcement action aimed at manufacturers and retailers of certain disposable flavored electronic
nicotine delivery system products. However, despite recent increases in enforcement activity, the FDA’s lack of sufficient
enforcement actions against product categories that violate the law, including disposable and flavored e-vapor products and
products targeted to minors, have allowed such products to proliferate on the market.
Electronic Nicotine Delivery System Products: As of February 23, 2024, many manufacturers of menthol and other flavored e-
vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to
demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth. The FDA
has communicated in these MDOs that vapor products with non-tobacco flavors present unique questions relevant to the FDA’s
“Appropriate for the Protection of Public Health” standard and that successful applications require strong, product-specific
evidence. A number of these manufacturers are challenging the MDOs for their products. In January 2024, the U.S. Court of
Appeals for the Fifth Circuit ruled that the FDA processes and procedures for addressing e-vapor PMTAs violated federal law
and that, among other things, the FDA had failed to give applicants fair notice of, and repeatedly changed positions with respect
to, the information required to obtain a PMTA. The court decided the case en banc, with all judges on the court hearing the
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case. Other U.S. Courts of Appeal have upheld adverse FDA determinations, and there are pending requests that the U.S.
Supreme Court review these decisions.
Potential Product Standards
Nicotine in Cigarettes and Other Combustible Tobacco Products: In March 2018, the FDA issued an ANPRM seeking
comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes
to non-addictive or minimally addictive levels. Among other issues, the FDA sought comments on (i) whether smokers would
compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the
proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that
may be established by the FDA. The FDA also sought comments on whether a nicotine product standard should apply to other
combustible tobacco products, including cigars. In December 2023, the Biden Administration published its Fall 2023 Unified
Regulatory Agenda, which includes the FDA’s plans to propose, by April 2024, a product standard that would establish a
maximum nicotine level in cigarettes and other combustible tobacco products. Any proposed product standard would proceed
through the rulemaking process, which we believe will take multiple years to complete.
Flavors in Tobacco Products: In April 2022, the FDA issued two proposed product standards: (i) banning menthol in cigarettes
and (ii) banning all characterizing flavors (including menthol) in cigars. The Biden Administration’s Fall 2023 Unified
Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to these proposed product standards by
March 2024. The FDA has not completed rulemaking with respect to either proposed product standard, but in October 2023
submitted the two proposed product standards to the White House Office of Management and Budget for review. We submitted
comments during the notice-and-comment period and plan to continue engaging with the FDA through the rulemaking process.
The FDA could propose an additional product standard for flavors in innovative tobacco products, including e-vapor products
and oral nicotine products.
N-nitrosonornicotine (“NNN”) in Smokeless Tobacco: In January 2017, the FDA proposed a product standard for NNN levels
in finished smokeless tobacco products.
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If any one or more of the foregoing potential product standards were to become final and was appealed and upheld in the courts, it could
have a material adverse effect on our business, results of operations, cash flows or financial position, including a material adverse effect
on the carrying value of certain of our assets such as our cigar trademarks.
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Good Manufacturing Practices: In March 2023, the FDA, pursuant to the requirements of the FSPTCA, issued a proposed
rule setting forth requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of
their products. This proposed rule establishes a framework of good manufacturing practices, including by:
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establishing tobacco product design and development controls;
ensuring that finished and bulk tobacco products are manufactured according to established specifications;
▪ minimizing the manufacture and distribution of tobacco products that do not meet specifications;
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requiring manufacturers to take appropriate measures to prevent contamination of tobacco products;
requiring investigation and identification of products that do not meet specifications and requiring manufacturers to
institute appropriate corrective actions, such as a recall; and
establishing the ability to trace all components or parts, ingredients, additives and materials, as well as each batch of
finished or bulk tobacco products, to aid in investigations of those that do not meet specifications.
We engaged with the FDA through the rulemaking process, including during the notice-and-comment period, which closed in
October 2023. If the proposed rule were to take effect, compliance with these requirements could result in increased costs.
Impact on Our Business; Compliance Costs and User Fees: Additional FDA regulatory actions under the FSPTCA could
have a material adverse effect on our business, results of operations, cash flows or financial position in various ways. For
example, actions by the FDA could:
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impact the consumer acceptability of tobacco products;
discontinue, delay or prevent the sale or distribution of existing, new or modified tobacco products;
limit adult tobacco consumer choices;
impose restrictions on communications with adult tobacco consumers;
create a competitive advantage or disadvantage for certain tobacco companies;
impose additional manufacturing, labeling or packaging requirements;
impose additional restrictions at retail;
result in increased illicit trade in tobacco products; and
otherwise significantly increase the cost of doing business.
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The FSPTCA imposes user fees on cigarette, cigarette tobacco, smokeless tobacco, cigar and pipe tobacco manufacturers and importers
to pay for the cost of regulation and other matters. The FSPTCA does not impose user fees on e-vapor or oral nicotine pouch
manufacturers. The cost of the FDA user fee is allocated first among tobacco product categories subject to FDA user fees and then
among manufacturers and importers within each respective category based on their relative market shares, all as prescribed by the
FSPTCA and FDA regulations. Payments for user fees are adjusted for several factors, including market share and industry volume.
See Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below for a discussion of our
FDA user fee payments. In addition, compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in
additional costs. The amount of additional compliance and related costs has not been material in any given quarter or year-to-date period
but could become material, either individually or in the aggregate. The failure to comply with FDA regulatory requirements, even
inadvertently, and FDA enforcement actions also could have a material adverse effect on our business, results of operations, cash flows
or financial position.
Investigation and Enforcement: The FDA has a number of investigatory and enforcement tools available to it, including
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document requests and other required information submissions, facility inspections, facility closures, examinations and investigations,
injunction proceedings, monetary penalties, product withdrawal and recall orders, and product seizures. Investigations or enforcement
actions could result in significant costs or otherwise have a material adverse effect on our business, results of operations, cash flows or
financial position.
Excise Taxes
Tobacco products are subject to substantial excise taxes in the United States. Significant increases in tobacco-related taxes or fees have
been proposed or enacted (including with respect to e-vapor products) and are likely to continue to be proposed or enacted at the federal,
state and local levels within the United States. The frequency and magnitude of excise tax increases can be influenced by various
factors, including the composition of executive and legislative bodies.
Federal, state and local cigarette excise taxes have increased substantially over the past two decades, far outpacing the rate of inflation.
Between the end of 1998 and February 23, 2024, the weighted-average state cigarette excise tax increased from $0.36 to $1.90 per pack.
Only one state, New York, enacted new legislation increasing excise taxes in 2023. As of February 23, 2024, no states have enacted
excise tax increases in 2024. However, various increases are under consideration or have been proposed.
A majority of states currently tax MST using an ad valorem method, which is calculated as a percentage of the price of the product,
typically the wholesale price. This ad valorem method results in more tax being paid on premium products than is paid on lower-priced
products of equal weight. We support legislation to convert ad valorem taxes on MST to a weight-based methodology because, unlike
the ad valorem tax, a weight-based tax subjects cans of equal weight to the same tax. As of February 23, 2024, the federal government,
23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.
North Carolina has passed legislation that will cause the state to adopt a weight-based tax methodology for MST in July 2025.
An increasing number of states and localities also are imposing excise taxes on e-vapor products and oral nicotine pouches. As of
February 23, 2024, 33 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-
vapor products. These taxes are calculated in varying ways and may differ based on the e-vapor product form. Similarly, 11 states and
the District of Columbia have enacted legislation to tax oral nicotine pouches.
Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ products through lower
consumption levels and the potential shift in adult tobacco consumer purchases from premium to non-premium or discount cigarettes, to
lower taxed tobacco products or to counterfeit and contraband products. Lower sales volume and reported share performance of our
operating companies’ products could have a material adverse effect on our business, results of operations, cash flows or financial
position. In addition, substantial excise tax increases on e-vapor and oral nicotine products may negatively impact adult smokers’
transition to these products, which could materially adversely affect our ability to achieve our Vision.
International Treaty on Tobacco Control
The World Health Organization’s Framework Convention on Tobacco Control (the “FCTC”) entered into force in February 2005. As of
February 23, 2024, 182 countries, as well as the European Union, have become parties to the FCTC. While the United States is a
signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S.
Senate. The FCTC is the first international public health treaty and its objective is to establish a global agenda for tobacco regulation
with the purpose of reducing initiation of tobacco use and encouraging cessation. The treaty recommends (and in certain instances,
requires) signatory nations to enact legislation that would address various tobacco-related issues.
There are a number of proposals currently under consideration by the governing body of the FCTC, some of which call for substantial
restrictions on the manufacture, marketing, distribution and sale of tobacco products. It is not possible to predict the outcome of these
proposals or the impact of any FCTC actions on legislation or regulation in the United States, either indirectly or as a result of the United
States becoming a party to the FCTC, or whether or how these actions might indirectly influence FDA regulation and enforcement.
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State Settlement Agreements
As discussed in Note 19, during 1997 and 1998, PM USA and other major domestic cigarette manufacturers entered into the State
Settlement Agreements. These settlements require participating manufacturers to make substantial annual payments, which are adjusted
for several factors, including inflation, operating income, market share and industry volume. Increases in inflation can increase our
financial liability under the State Settlement Agreements. The State Settlement Agreements’ inflation calculations require us to apply
the higher of 3% or the U.S. Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (“CPI-U”) percentage rate as
published in January of each year. As of December 2023, the inflation calculation was approximately 3.4% based on the latest CPI-U
data; however, the increase in the annual payments did not have a material impact on our financial position. We believe that inflation
will continue at increased levels in 2024, but do not expect the corresponding increase in annual payments to result in a material
financial impact. However, we will continue to monitor the impact of increased inflation on the macroeconomic environment and our
businesses.
For a discussion of the impact of the State Settlement Agreements on us, see Liquidity and Capital Resources - Payments Under State
Settlement Agreements and FDA Regulation below and Note 19. The State Settlement Agreements also place numerous requirements
and restrictions on participating manufacturers’ business operations, including prohibitions and restrictions on the advertising and
marketing of cigarettes and smokeless tobacco products. Among these are prohibitions of outdoor and transit brand advertising,
payments for product placement and free sampling (except in adult-only facilities). The State Settlement Agreements also place
restrictions on the use of brand name sponsorships and brand name non-tobacco products and prohibitions on targeting youth and the use
of cartoon characters. In addition, the State Settlement Agreements require companies to affirm corporate principles directed at reducing
underage use of cigarettes; impose requirements regarding lobbying activities; limit the industry’s ability to challenge certain tobacco
control and underage use laws; and provide for the dissolution of certain tobacco-related organizations and place restrictions on the
establishment of any replacement organizations.
In November 1998, USSTC entered into the Smokeless Tobacco Master Settlement Agreement (the “STMSA”) with the attorneys
general of various states and United States territories to resolve the remaining health care cost reimbursement cases initiated against
USSTC. The STMSA required USSTC to adopt various marketing and advertising restrictions. USSTC is the only smokeless tobacco
manufacturer to sign the STMSA.
Other International, Federal, State and Local Regulation and Governmental and Private Activity
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International, Federal, State and Local Regulation: Various states and localities have enacted or proposed legislation that
imposes restrictions on tobacco products (including cigarettes, smokeless tobacco, cigars, e-vapor products and oral nicotine pouches),
such as legislation that (i) prohibits the sale of all tobacco products or certain tobacco categories, such as e-vapor, (ii) prohibits the sale
of tobacco products with characterizing flavors, such as menthol cigarettes and flavored e-vapor products, (iii) requires the disclosure of
health information separate from or in addition to federally mandated health warnings, (iv) restricts commercial speech or imposes
additional restrictions on the marketing or sale of tobacco products and (v) requires manufacturers of e-vapor products to certify that
they are in compliance with FDA requirements to be allowed to sell in the state. The legislation varies in terms of the type of tobacco
products, the conditions under which such products are or would be restricted or prohibited, and exceptions to the restrictions or
prohibitions. For example, a number of proposals involving characterizing flavors would prohibit smokeless tobacco products with
characterizing flavors without providing an exception for mint- or wintergreen-flavored products. As of February 23, 2024, multiple
states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts,
New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation. Some of these states, such as
New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway. The
legislation in California, which became effective in December 2022, bans the sale of most tobacco products with characterizing flavors,
including menthol, mint and wintergreen.
Massachusetts passed legislation capping the amount of nicotine in e-vapor products, and Utah capped the amount of nicotine in e-vapor
products by administrative rule. Legislation relating to this issue is pending in Utah and two other states.
Similar restrictions to those enacted or proposed in various U.S. states and localities on e-vapor and oral nicotine pouch products have
been enacted or proposed internationally.
We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including
through litigation. Certain legislation imposing restrictions on tobacco products, such as state laws requiring manufacturers of e-vapor
products to certify that they are in compliance with federal law in order to sell products in the state, aligns with our Vision, and we
actively engage with lawmakers in support of such legislation. It is possible, however, that legislation, regulation or other governmental
action could be enacted or implemented that could have a material adverse impact on our business, results of operations, cash flows or
financial position. Such action also could negatively impact adult smokers’ transition to smoke-free products, which could materially
adversely affect our ability to achieve our Vision.
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and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor
Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products: After a number of states
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products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products,
including e-vapor products, to 21 nationwide. As of February 23, 2024, 42 states, the District of Columbia and Puerto Rico have enacted
laws increasing the legal age to purchase tobacco products to 21. Although an increase in the minimum age to purchase tobacco
products may have a negative impact on our operating companies’ sales volumes, we support raising the minimum legal age to purchase
all tobacco products to 21 at the federal and state levels, as discussed above under Underage Access and Use of Certain Tobacco
Products, reflecting our longstanding commitment to combat underage tobacco use.
Health Effects of Tobacco Products, Including E-vapor Products: Reports with respect to the health effects of smoking
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have been publicized for many years, including various reports by the U.S. Surgeon General. We believe that the public should be
guided by the messages of the U.S. Surgeon General and public health authorities worldwide in making decisions concerning the use of
tobacco products, including e-vapor products. It is not possible to predict the results of ongoing scientific research or the types of future
scientific research into the health risks of tobacco exposure and the impact of such research on legislation and regulation.
Most jurisdictions within the United States have restricted smoking in public places and some have restricted vaping in public places.
Some public health groups have called for, and various jurisdictions have adopted or proposed, bans on smoking and vaping in outdoor
places, in private apartments and in cars transporting children.
Other Legislation or Governmental Initiatives: In addition to the actions discussed above, other regulatory initiatives
▪
affecting the tobacco industry have been adopted or are being considered at the federal level and in a number of state and local
jurisdictions. For example, in recent years, legislation has been introduced or enacted at the state or local level to subject tobacco
products to various reporting requirements and performance standards; establish educational campaigns relating to tobacco consumption
or tobacco control programs or provide additional funding for governmental tobacco control activities; restrict the sale of tobacco
products in certain retail establishments and the sale of tobacco products in certain package sizes; prohibit the sale of tobacco products
based on environmental concerns; impose responsibility on manufacturers for the disposal, recycling or other treatment of post-
consumer goods such as plastic packaging; require tax stamping of smokeless tobacco products; require the use of state tax stamps using
data encryption technology; and further restrict the sale, marketing and advertising of cigarettes and other tobacco products. Such
legislation may be subject to constitutional or other challenges on various grounds, which may or may not be successful. In addition, if a
pandemic or similar health emergency occurs, state and local governments may reimpose additional health and safety requirements for
all businesses, which could result in the potential temporary closure of certain businesses and facilities. It is possible that tobacco
manufacturing and other facilities and the facilities of our suppliers, our suppliers’ suppliers and our trade partners could be subject to
additional government-mandated temporary closures and restrictions.
It is not possible to predict what, if any, additional legislation, regulation or other governmental action will be enacted or implemented
(and, if challenged, upheld) relating to the manufacturing, design, packaging, marketing, advertising, sale or use of tobacco products, or
the tobacco industry generally. Any such legislation, regulation or other governmental action could have a material adverse impact on
our business, results of operations, cash flows or financial position.
Governmental Investigations: From time to time, we are subject to governmental investigations on a range of matters. For
▪
example, we currently are, or recently have been, subject to a number of governmental investigations with respect to our former
investment in JUUL, which we divested in March 2023, including the following: (i) the FTC issued a Civil Investigative Demand to us
while conducting its antitrust review of our former investment in JUUL seeking information regarding, among other things, our role in
the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or
employee (see Note 19 for a description of the FTC’s administrative complaint against us and JUUL); (ii) the SEC commenced an
investigation relating to our acquisition, disclosures and accounting controls in connection with the JUUL investment; and (iii) the New
York State Office of the Attorney General and the Commonwealth of Massachusetts Office of the Attorney General, separately, issued
independent subpoenas to us seeking documents relating to our former investment in and provision of services to JUUL. For a
discussion of our disposition of our interest in JUUL, see Note 7.
We are a party to lawsuits initiated by the attorneys general of Hawaii and New Mexico relating to our former investment in JUUL. In
April 2023 and January 2024, we agreed to settle the lawsuits initiated by the attorneys general of Minnesota and Alaska, respectively.
Private Sector Activity on Tobacco Products
A number of retailers, including national chains, have discontinued the sale of all tobacco products, and others have discontinued the
sale of e-vapor products. Reasons for the discontinuation include change in corporate policy and, with respect to e-vapor products,
reported illnesses and the uncertain regulatory environment. Furthermore, third-party digital platforms, such as app stores, have
restricted, and in some cases prohibited, communications with adult tobacco consumers concerning tobacco products. It is possible that
if this private sector activity becomes more widespread it could have an adverse effect on our business, results of operations, cash flows
or financial position.
Illicit Trade in Tobacco Products
Illicit trade in tobacco products can have an adverse impact on our business. Illicit trade can take many forms, including the sale of
counterfeit tobacco products; the sale of tobacco products in the United States that are intended for sale outside the country; the sale of
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untaxed tobacco products over the Internet and by other means designed to avoid the collection of applicable taxes; the sale of
unregulated products; and diversion into one taxing jurisdiction of tobacco products intended for sale in another. Counterfeit tobacco
products, for example, are manufactured by unknown third parties in unregulated environments. Counterfeit versions of our products
can negatively affect adult tobacco consumer experiences with and opinions of those brands. Illegal disposable e-vapor products may be
designed to appeal to youth and are manufactured without scientific standards, exposing consumers to undocumented risks. Illicit trade
in tobacco products also harms law-abiding wholesalers and retailers by depriving them of lawful sales and undermines the significant
investment we have made in legitimate distribution channels. Moreover, illicit trade in tobacco products results in federal, state and
local governments losing tax revenues. Losses in tax revenues can cause such governments to take various actions, including increasing
excise taxes, imposing legislative or regulatory requirements, or asserting claims against manufacturers of tobacco products or members
of the trade channels through which such tobacco products are distributed and sold, each of which may have an adverse effect on our
business, results of operations, cash flows or financial position.
We communicate with wholesale and retail trade members regarding illicit trade in tobacco products and how we can help prevent such
activities, enforce wholesale and retail trade programs and policies that address illicit trade in tobacco products and, when necessary,
litigate to protect our trademarks. We also engage with the FDA and other government agencies to advocate for a well-regulated U.S.
tobacco industry that embraces harm reduction and the enforcement of existing regulatory frameworks.
Prohibitory policies, such as California’s ban on the sale of flavored tobacco products, which went into effect in 2022, can have
unintended negative consequences, including the proliferation of counterfeit and unregulated products. We actively engage with
regulators, state and federal lawmakers, our trade partners and other stakeholders to bring awareness to these issues. When appropriate,
we also take legal action to protect our lawful e-vapor product business, such as the lawsuit we filed in federal court in California against
manufacturers of illegal e-vapor products in October 2023. Although all but one defendant was dismissed from this suit without
prejudice on procedural grounds in January 2024, we intend to continue pursuing this litigation.
Price, Availability and Quality of Tobacco, Other Raw Materials, Ingredients and Component Parts
Shifts in crops (such as those driven by economic conditions and adverse weather patterns), government restrictions and mandated
prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation,
geopolitical instability, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or
reduce the supply or quality of tobacco, other raw materials, ingredients or component parts used to manufacture our operating
companies’ products. Any significant change in such factors could negatively impact our ability to continue manufacturing and
marketing existing products, increase our costs or negatively impact adult tobacco consumer product acceptability and have a material
adverse effect on our business and profitability.
As with other agricultural commodities, tobacco price, quality and availability can be influenced by variations in weather patterns,
including those caused by climate change, and macroeconomic conditions and imbalances in supply and demand, among other factors.
For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political
instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability
and quality. In addition, as consumer demand increases for innovative smoke-free products and decreases for combustible and MST
products, the volume of tobacco leaf required for production of these products has decreased, resulting in reduced tobacco leaf demand.
Reduced demand for tobacco leaf may result in the reduced supply and availability of domestic tobacco, as growers divert resources to
other crops or cease farming, and increased costs. The unavailability or unacceptability of any one or more particular varieties of
tobacco leaf or the unavailability of nicotine extract necessary to manufacture our operating companies’ products could negatively
impact our ability to continue marketing existing products or impact adult tobacco consumer product acceptability, which could have a
material adverse effect on our business and profitability. In addition, the nicotine used in our operating companies’ innovative smoke-
free products is extracted from tobacco produced in one country. If we are unable to identify alternate sources of nicotine for our
companies’ innovative products, we could be exposed to supply risk.
Current macroeconomic conditions and geopolitical instability (including inflation, high interest rates, labor shortages, supply and
demand imbalances and geopolitical instability and international armed conflict) have caused and continue to cause worldwide
disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials,
ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging). We have implemented and
continue to implement various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for
production.
In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the
costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our products. For example, certain
states have passed extended producer responsibility legislation concerning packaging. Because certain of our products’ packaging
consists of single-use plastics, single-use plastic bans and extended producer responsibility mandates could result in bans on some of our
product packaging or our products and adversely impact our costs and revenues. Additional taxes and limitations on the use of certain
single-use plastics have been proposed by the U.S. Congress and various state and local governments. These existing and potential
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future laws and regulations could increase the costs of, and impair our ability to, source certain materials used in the packaging for our
products.
We work to mitigate these risks by maintaining inventory levels of certain tobacco varieties that cover several years, purchasing raw
materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts
with some of our tobacco growers and direct material suppliers. To date, the impact on us of changes in the price, availability and
quality of tobacco, other raw materials, ingredients and component parts has not been material. However, the effects of the current
macroeconomic and geopolitical conditions on prices, availability and quality of such items may continue, which could have a material
adverse effect on our business, results of operations, cash flows or financial position.
Timing of Sales
In the ordinary course of business, we are subject to many influences that can impact the timing of sales to customers, including the
timing of holidays and other annual or special events, the timing of promotions, customer incentive programs and customer inventory
programs, as well as the actual or speculated timing of pricing actions and tax-driven price increases.
Operating Results
The following table provides reconciliations of reported OCI to adjusted OCI for our reportable segments, all other category and total
OCI and provides the related OCI margins:
For the Year Ended December 31, 2023
(in millions)
Net revenues
Excise taxes
Revenues net of excise taxes
Reported OCI
NPM Adjustment Items
Tobacco and health and certain other litigation items
$
$
$
Smokeable
Products
Oral Tobacco
Products
All Other
Total
21,756 $
(3,869)
17,887 $
2,667 $
(112)
2,555 $
60 $
—
60 $
24,483
(3,981)
20,502
10,670 $
1,722 $
(74) $
12,318
(29)
69
—
—
—
—
(29)
69
Adjusted OCI
$
10,710 $
1,722 $
(74) $
12,358
Reported OCI margin (1)
Adjusted OCI margin (1)
(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.
(100.0) %
(100.0) %
67.4 %
59.9 %
59.7 %
67.4 %
60.1 %
60.3 %
Our U.S. smoke-free portfolio reported the following results for 2023:
▪
▪
Smoke-free volumes of approximately 806 million units were essentially flat when compared to 2022; and
Total smoke-free net revenues were $2.7 billion, which includes net revenues from innovative smoke-free products of $165
million.
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Smokeable Products Segment
Financial Results
The following table summarizes operating results, includes reported and adjusted OCI margins and provides a reconciliation of reported
OCI to adjusted OCI for our smokeable products segment:
(in millions)
Net revenues
Excise taxes
Revenues net of excise taxes
Reported OCI
NPM Adjustment Items
Tobacco and health and certain other litigation items
Adjusted OCI
Operating Results
For the Years Ended December 31,
2023
2022
$
$
$
$
21,756
(3,869)
17,887
10,670
(29)
69
10,710
$
$
$
$
22,476
(4,289)
18,187
10,688
(63)
101
10,726
58.8 %
59.0 %
Reported OCI margins (1)
Adjusted OCI margins (1)
(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.
59.7 %
59.9 %
2023 Compared with 2022
Net revenues, which include excise taxes billed to customers, decreased $720 million (3.2%), due primarily to lower shipment volume
($2,394 million), partially offset by higher pricing ($1,667 million), which includes higher promotional investments.
Reported OCI decreased $18 million (0.2%), due primarily to lower shipment volume ($1,490 million), higher per unit settlement
charges and lower NPM Adjustment Items ($34 million), mostly offset by higher pricing, which includes higher promotional
investments.
Adjusted OCI decreased $16 million (0.1%), due primarily to lower shipment volume, higher per unit settlement charges and higher
costs ($43 million), mostly offset by higher pricing, which includes higher promotional investments.
Marketing, administration and research costs for the smokeable products segment include PM USA’s cost of administering and litigating
product liability claims. Litigation defense costs are influenced by a number of factors, including the number and types of cases filed,
the number of cases tried annually, the results of trials and appeals, the development of the law controlling relevant legal issues, and
litigation strategy and tactics. For further discussion on these matters, see Note 19 and Item 3. For the years ended December 31, 2023
and 2022, product liability defense costs for PM USA were $133 million. The factors that have influenced past product liability costs
are expected to continue to influence future costs. We do not expect future product liability defense costs for our smokeable products
segment to be significantly different from product liability defense costs incurred in 2023.
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Shipment Volume and Retail Share Results
The following table summarizes our smokeable products segment’s shipment volume performance:
(sticks in millions)
Cigarettes:
Marlboro
Other premium
Discount
Total cigarettes
Cigars:
Black & Mild
Other
Total cigars
Total smokeable products
Shipment Volume
For the Years Ended December 31,
2023
2022
68,801
3,533
4,002
76,336
1,777
3
1,780
78,116
75,406
3,866
5,406
84,678
1,727
4
1,731
86,409
Note: Cigarettes shipment volume includes Marlboro; Other premium brands, such as Virginia Slims, Parliament and Benson & Hedges; and Discount
brands, which include L&M, Basic and Chesterfield. Cigarettes volume includes units sold as well as promotional units but excludes units sold for
distribution to Puerto Rico, U.S. Territories to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is
material to our smokeable products segment.
The following table summarizes our cigarettes retail share performance:
Cigarettes:
Marlboro
Other premium
Discount
Total cigarettes
Retail Share
For the Years Ended December 31,
2023
2022
42.1 %
2.3
2.5
46.9 %
42.5 %
2.3
3.1
47.9 %
Note: Retail share results for cigarettes are based on data from Circana, Inc. and Circana Group, L.P. (“Circana”), as well as, Management Science
Associates, Inc. Circana is a newly formed company reflecting the recent merger of IRI and NPD Group, Inc. Circana maintains a blended retail
service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. Similar to prior reporting, this
service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling
cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System (“STARS”), as
provided by Management Science Associates, Inc. This service is not designed to capture sales through other channels, including the internet, direct
mail and some illicitly tax-advantaged outlets. It is the standard practice of retail services to periodically refresh their retail scan services, which could
restate retail share results that were previously released in these services.
For a discussion of volume trends and factors that impact volume and retail share performance, see Business Environment above.
2023 Compared with 2022
Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 9.9%, driven primarily by the industry’s
decline rate (impacted by macroeconomic pressures on adult tobacco consumers’ disposable income and the growth of illicit e-vapor
products) and retail share losses, partially offset by trade inventory movements. When adjusted for trade inventory movements, our
smokeable products segment’s domestic cigarettes shipment volume decreased by an estimated 10%. When adjusted for trade inventory
movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8%.
Shipments of premium cigarettes accounted for 94.8% and 93.6% of our smokeable products segment’s reported domestic cigarettes
shipment volume for 2023 and 2022, respectively.
Our cigar reported shipment volume increased by 2.8%.
Marlboro’s retail share of the total cigarette category was 42.1%, a decrease of 0.4 share points, due primarily to increased
macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity.
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Total cigarettes industry discount category retail share increased 1.4 share points to 28.3%, due to increased macroeconomic pressures
on adult tobacco consumers’ disposable income.
For a discussion regarding discount category dynamics in 2023 and the economic conditions, including a high inflationary environment,
that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary
above.
Pricing Actions
PM USA and Middleton executed the following pricing and promotional allowance actions during 2023 and 2022:
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Effective October 15, 2023, PM USA increased the list price of Marlboro, L&M and Basic by $0.17 per pack. PM USA also
increased the list price of all its other cigarette brands by $0.22 per pack.
Effective July 23, 2023, PM USA increased the list price of Marlboro, L&M and Basic by $0.16 per pack. PM USA also
increased the list price of all its other cigarette brands by $0.21 per pack.
Effective June 11, 2023, Middleton increased various list prices across substantially all of its cigar brands resulting in a
weighted-average increase of approximately $0.15 per five-pack.
Effective April 23, 2023, PM USA increased the list price of Marlboro, L&M and Basic by $0.15 per pack. PM USA also
increased the list price of all its other cigarette brands by $0.20 per pack.
Effective January 22, 2023, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM
USA also increased the list price of all its other cigarette brands by $0.20 per pack.
Effective October 16, 2022, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack.
PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.
Effective July 17, 2022, PM USA increased the list price on all of its cigarette brands by $0.15 per pack.
Effective May 22, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a
weighted-average increase of approximately $0.17 per five-pack.
Effective April 24, 2022, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM
USA also increased the list price of all its other cigarette brands by $0.20 per pack.
Effective January 9, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a
weighted-average increase of approximately $0.13 per five-pack.
In addition:
▪
Effective January 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol),
L&M and Basic by $0.15 per pack. PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.
Oral Tobacco Products Segment
Financial Results
The following table summarizes operating results, includes reported and adjusted OCI margins and provides a reconciliation of reported
OCI to adjusted OCI for our oral tobacco products segment:
Operating Results
For the Years Ended December 31,
2023
2022
$
$
$
2,667
(112)
2,555
1,722
$
$
$
2,580
(119)
2,461
1,632
66.3 %
(in millions)
Net revenues
Excise taxes
Revenues net of excise taxes
Reported and Adjusted OCI
Reported and Adjusted OCI margins (1)
(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.
67.4 %
2023 Compared with 2022
Net revenues, which include excise taxes billed to customers, increased $87 million (3.4%) due primarily to higher pricing ($190
million), partially offset by lower shipment volume and a higher percentage of on! shipment volume relative to MST (“volume/mix”)
versus 2022 ($100 million).
Reported and adjusted OCI increased $90 million (5.5%), due primarily to higher pricing and lower costs, partially offset by lower
volume/mix ($104 million).
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Shipment Volume and Retail Share Results
The following table summarizes our oral tobacco products segment’s shipment volume performance:
(cans and packs in millions)
Copenhagen
Skoal
on!
Other
Total oral tobacco products
Shipment Volume
For the Years Ended December 31,
2023
2022
440.1
163.1
114.3
65.4
782.9
470.6
179.4
82.5
68.1
800.6
Note: Other primarily includes Red Seal and Husky. Oral tobacco products shipment volume includes cans and packs sold, as well as promotional units,
but excludes international volume, which is currently not material to our oral tobacco products segment. New types of oral tobacco products, as well as
new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. To
calculate volumes of cans and packs shipped, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or
can, is assumed to be equivalent to one can of MST.
The following table summarizes our oral tobacco products segment’s retail share performance (excluding international volume):
Copenhagen
Skoal
on!
Other
Total oral tobacco products
Retail Share
For the Years Ended December 31,
2023
2022
23.6 %
9.5
6.8
2.9
42.8 %
27.1 %
11.3
5.0
3.1
46.5 %
Note: Our oral tobacco products segment’s retail share results exclude international volume, which is currently not material to our oral tobacco products
segment. Retail share results for oral tobacco products are based on data from Circana, a tracking service that uses a sample of stores to project market
share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes
on the number of cans and packs sold. Oral tobacco products are defined by Circana as MST, snus and oral nicotine pouches. New types of oral
tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on
a can-for-can basis. For example, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is
assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be
considered a precise measurement of actual retail share. It is the standard practice of retail services to periodically refresh their retail scan services,
which could restate retail share results that were previously released in these services.
For a discussion of volume trends and factors that impact volume and retail share performance, see Business Environment above.
2023 Compared with 2022
Our oral tobacco products segment’s reported domestic shipment volume decreased 2.2%, driven primarily by retail share losses in
MST, partially offset by the industry’s growth rate, trade inventory movements and other factors. When adjusted for trade inventory
movements and calendar differences, our oral tobacco products segment’s domestic shipment volume decreased by an estimated 2.5%.
Total oral tobacco products category industry volume increased by an estimated 7.5% for the six months ended December 31, 2023,
driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.
Our oral tobacco products segment’s retail share was 42.8%, as share declines for MST products were driven primarily by the category
share growth of oral nicotine pouches.
The U.S. nicotine pouch category grew to 31.0% of the U.S. oral tobacco category, an increase of 9.4 share points versus the prior year.
In addition, on!’s share of the nicotine pouch category was 22.0%.
Pricing Actions
USSTC and Helix executed the following pricing actions during 2023 and 2022:
▪
▪
Effective August 22, 2023, USSTC increased the list price on its Copenhagen, Red Seal and Skoal brands by $0.09 per can. In
addition, USSTC decreased the list price on select Husky brands by $0.18 per can.
Effective July 23, 2023, Helix increased the list price on its on! brand by $0.09 per can.
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▪
▪
▪
▪
▪
Effective April 25, 2023, USSTC increased the list price on its Copenhagen popular price products, Red Seal and Husky brands
by $0.09 per can. In addition, USSTC increased the list price on its Skoal brands and on the balance of its Copenhagen brands
by $0.10 per can.
Effective January 24, 2023, USSTC increased the list price on its Copenhagen, Skoal, Red Seal and Husky brands by $0.09 per
can.
Effective July 26, 2022, USSTC increased the list price on its Copenhagen popular price products by $0.13 per can. USSTC
also decreased the list price on select Copenhagen brands by $0.11 per can. In addition, USSTC increased the list price on its
Skoal and Red Seal brands and the balance of its Copenhagen brands by $0.09 per can and increased the list price on its Husky
brand by $0.12 per can.
Effective May 24, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.09 per can.
USSTC also increased the list price on its Husky brand by $0.12 per can.
Effective February 22, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.08 per can.
USSTC also increased the list price on its Husky brand by $0.12 per can.
In addition:
▪
Effective January 23, 2024, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.11 per can.
E-Vapor
Our NJOY e-vapor business is reported in our all other category. Reported domestic shipment volumes since June 1, 2023 through
December 31, 2023 for NJOY consumables(1) and devices were approximately 23.0 million units and 1.3 million units, respectively.
In 2023, we strengthened NJOY’s global supply chain to provide sustainable support for the anticipated volume increase associated with
our NJOY ACE expansion plans and do not anticipate capacity constraints as we execute our initial expansion plans. We expanded
NJOY ACE distribution to a total of 75,000 stores by the end of 2023, an increase of 40,000 stores since the completion of the NJOY
Transaction. These stores represent approximately 75% of e-vapor volume and 55% of cigarette volume sold in traditional retail.
(1) E-vapor shipment volume includes NJOY ACE pods and DAILY disposables.
Liquidity and Capital Resources
We are a holding company that is primarily dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements.
Our access to the operating cash flows of our subsidiaries consists of cash received from the payment of dividends and distributions, and
the payment of interest on intercompany loans. At December 31, 2023, our significant subsidiaries were not limited by contractual
obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests. In addition, we receive
cash dividends on our interest in ABI and will continue to do so as long as ABI pays dividends.
At December 31, 2023, we had $3.7 billion of cash and cash equivalents. In addition to having access to the operating cash flows of our
subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion
Credit Agreement (as defined below), which we use for general corporate purposes, and access to credit markets through the issuance of
long-term senior unsecured notes. For additional information, see Capital Markets and Other Matters below.
In addition to funding current operations, we primarily use our net cash from operating activities for payment of dividends, share
repurchases under our share repurchase programs, repayment of debt, acquisitions of or investments in businesses and assets, and capital
expenditures.
We believe our cash and cash equivalents balance, along with our future cash flows from operations, capacity for borrowings under our
Credit Agreement and access to credit and capital markets, provide sufficient liquidity to meet the needs of our business operations and
to satisfy our projected cash requirements for the next 12 months and the foreseeable future.
Capital Markets and Other Matters
Credit Ratings - Our cost and terms of financing and our access to commercial paper markets may be impacted by applicable credit
ratings. The impact of credit ratings on the cost of borrowings under our Credit Agreement is discussed in Note 9. Short-Term
Borrowings and Borrowing Arrangements to our consolidated financial statements in Item 8 (“Note 9”).
At December 31, 2023, the credit ratings and outlook for our indebtedness by major credit rating agencies were:
Moody’s Investors Service, Inc. (“Moody’s”)
Standard & Poor’s Financial Services LLC (“S&P”)
Fitch Ratings Inc.
Short-term Debt
P-2
A-2
F2
Long-term Debt
A3
BBB
BBB
Outlook
Stable
Positive (1)
Stable
(1) On June 16, 2023, S&P changed its outlook for our indebtedness to Positive from Stable.
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Credit Lines - From time to time, we have short-term borrowing needs to meet our working capital requirements arising from the timing
of annual MSA payments, quarterly income tax payments and quarterly dividend payments, and generally use our commercial paper
program to meet those needs.
In October 2023, we entered into a new senior unsecured 5-year revolving credit agreement for borrowings of up to an aggregate
principal amount of $3.0 billion (“Credit Agreement”) and terminated our prior credit agreement. At December 31, 2023, we had
availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in
compliance with the covenants in our Credit Agreement. We expect to continue to meet the covenants in our Credit Agreement. We
monitor the credit quality of our bank group and do not know of any potential non-performing credit provider in that group. For further
discussion on short-term borrowings, see Note 9.
Term Loan Facility - In June 2023, we entered into a $2.0 billion term loan facility and borrowed the full amount available to fund a
portion of the cash payments paid at closing in connection with the NJOY Transaction. We repaid the term loan facility in full in July
2023. For further details on the term loan facility, see Note 9.
Long-Term Debt - At December 31, 2023 and 2022, our total long-term debt was $26.2 billion and $26.7 billion, respectively.
During 2023, our long-term debt activity included the following:
▪
▪
Debt Issuance - In November 2023, we issued USD denominated senior unsecured notes in the aggregate principal amount of
$1.0 billion. The net proceeds from the notes are being used for general corporate purposes, which included the repayment of
notes in the first quarter of 2024 discussed below.
Debt Repayment - In February and May 2023, we repaid in full at maturity, respectively, (i) senior unsecured Euro notes in the
aggregate principal amount of $1.3 billion (€1.25 billion) and (ii) senior unsecured notes in the aggregate principal amount of
$218 million.
In January and February 2024, we repaid in full at maturity senior unsecured notes in the aggregate principal amount of $776 million and
$345 million, respectively.
All of our long-term debt outstanding at December 31, 2023 and 2022 was fixed-rate debt. At December 31, 2023 and 2022, the
weighted-average coupon interest rate on total long-term debt was approximately 4.3% and 4.0%, respectively.
For further details on long-term debt, see Note 10. Long-Term Debt to our consolidated financial statements in Item 8 (“Note 10”).
At December 31, 2023, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:
(in millions)
Consolidated net earnings
Interest and other debt expense, net
Provision for income taxes
Depreciation and amortization
EBITDA
(Income) loss from investments in equity securities and noncontrolling interests, net
Dividends from less than 50% owned affiliates
Consolidated EBITDA
Current portion of long-term debt
Long-term debt
Total Debt
Total Debt / Consolidated net earnings
Total Debt / Consolidated EBITDA
For the Twelve Months Ended
December 31, 2023
$
$
$
$
8,130
989
2,798
272
12,189
(243)
163
12,109
1,121
25,112
26,233
3.2
2.2
NJOY Acquisition - On June 1, 2023, we funded the NJOY Transaction cash payments at closing of approximately $2.75 billion (net of
cash acquired), through a combination of a $2.0 billion term loan facility (discussed above), the issuance of commercial paper and
available cash. We may also be obligated to pay up to $500 million in additional cash payments that are contingent on receipt of FDA
authorizations with respect to certain NJOY products. For further discussion, see Note 3.
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45
IQOS Purchase Agreement - In 2022, we entered into an agreement with PMI to, among other things, transition and ultimately conclude
our relationship with respect to the IQOS System in the United States. We received a payment of $1.0 billion in 2022 and an additional
payment of approximately $1.8 billion (including interest) in July 2023. For further discussion, see Item 1 and Note 6.
In October 2023, we filed a registration statement on Form S-3 with the SEC, under which we may offer debt securities or warrants to
purchase debt securities from time to time over a three-year period from the date of filing.
Off-Balance Sheet Arrangements and Other Future Contractual Obligations
We had no off-balance sheet arrangements, including special purpose entities, other than guarantees and contractual obligations that are
discussed below.
Guarantees and Other Similar Matters - As discussed in Note 19, we had unused letters of credit obtained in the ordinary course of
business and guarantees (including third-party guarantees) outstanding at December 31, 2023. From time to time, we also issue lines of
credit to affiliated entities. As further discussed in Note 19, as part of the supplier financing program, Altria guarantees the financial
obligations of ALCS under the financing program agreement. In addition, as discussed below in Supplemental Guarantor Financial
Information and in Note 10, PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our Credit
Agreement and any amounts outstanding under our commercial paper program. These items have not had, and are not expected to have,
a significant impact on our liquidity.
Long-Term Debt and Interest on Borrowings - In addition to maturities of long-term debt, we make interest payments based on stated
coupon interest rates. For information on annual debt maturities and interest payments, see Note 10.
Purchase Obligations - We have entered into purchase obligations for inventory and production costs (such as raw materials, indirect
materials and services, contract manufacturing, packaging, storage and distribution) and other commitments for projected needs to be
used in the normal course of business. Arrangements are considered purchase obligations if a contract specifies all significant terms,
including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most
arrangements are cancelable without a significant penalty and with short notice (usually 30 days). At December 31, 2023, purchase
obligations for inventory and production costs for the next 12 months were $0.9 billion and $2.5 billion thereafter.
At December 31, 2023, we had $0.7 billion of other purchase obligation commitments for marketing, capital expenditures, information
technology and professional services, which occur through the ordinary course of business. The majority of these commitments are
expected to be satisfied within 12 months. Accounts payable and accrued liabilities are reflected on our consolidated balance sheet at
December 31, 2023 and are excluded from the amounts above.
Payments Under State Settlement Agreements and FDA Regulation - As discussed previously and in Note 19, PM USA has entered into
State Settlement Agreements with the states, the District of Columbia and certain U.S. territories that call for certain payments. In
addition, PM USA, Middleton and USSTC are subject to quarterly user fees imposed by the FDA as a result of the FSPTCA. For further
discussion of the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the MSA, see
Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 19.
Based on current agreements, estimated market share, estimated annual industry volume decline rates and inflation rates, the estimated
amounts that we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are $3.4 billion on
average for the next three years. The estimated amount for 2024 includes settling plaintiffs’ attorneys’ fees. We expect PM USA’s
obligations under the State Settlement Agreements to pay these fees will terminate in the fourth quarter of 2024. In addition, the amount
excludes the potential impact of any NPM Adjustment Items.
The estimated amounts due under the State Settlement Agreements charged to cost of sales in each year are generally paid in April of the
following year. The amounts charged to cost of sales for FDA user fees are generally paid in the quarter in which the fees are incurred.
We paid approximately $4.3 billion and $4.6 billion for the years ended December 31, 2023 and 2022, respectively, in connection with
the State Settlement Agreements and FDA user fees, primarily all of which was paid in the second quarter of each period. As previously
stated, the payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several
factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each
manufacturer’s market share. The future payment amounts discussed above are estimates, and actual payment amounts will differ to the
extent underlying assumptions differ from actual future results. For further discussion on the potential impact of inflation on future
payments, see Operating Results by Business Segment - State Settlement Agreements.
Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments
pending appeals, as of December 31, 2023, PM USA had posted appeal bonds totaling $35 million, which have been collateralized with
restricted cash that is included in assets on our consolidated balance sheet.
Litigation is subject to uncertainty, and an adverse outcome or settlement of litigation could have a material adverse effect on our results
of operations, cash flows or financial position in a particular fiscal quarter or fiscal year, as more fully disclosed in Note 19, Item 3 and
Item 1A.
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46
Other Long-Term Liabilities - We had $1.1 billion of accrued postretirement health care costs on our consolidated balance sheet at
December 31, 2023 and estimate approximately $95 million of annual payments. In addition, we had accrued pension obligations,
substantially all of which are funded from plan assets. For further information on our postretirement health care and pension obligations,
see Note 17. We are unable to estimate the timing of payments of other long-term liabilities (accrued postemployment costs, income
taxes and tax contingencies, and other accruals) included on our consolidated balance sheet at December 31, 2023.
Equity and Dividends
Dividends paid in 2023 and 2022 were approximately $6.8 billion and $6.6 billion, respectively, an increase of 2.7%, reflecting a higher
dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.
In the third quarter of 2023, our Board of Directors declared a 4.3% increase in the quarterly dividend rate to $0.98 per share of our
common stock versus the previous rate of $0.94 per share. Our current annualized dividend rate is $3.92 per share. In the first quarter of
2023, we established a new progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028.
Future dividend payments remain subject to the discretion of our Board.
For a discussion of our share repurchase programs, see Note 11. Capital Stock to our consolidated financial statements in Item 8 and Part
II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in this Form
10-K.
Financial Review
Cash Provided by/Used in Operating Activities
During 2023, net cash provided by operating activities was $9.3 billion compared with $8.3 billion during 2022. This increase was due
primarily to lower payments for income taxes and State Settlement Agreements.
We had a working capital deficit at December 31, 2023 and 2022, and believe we have the ability to fund working capital deficits with
cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.
Cash Provided by/Used in Investing Activities
During 2023, net cash used in investing activities was $1.3 billion compared with net cash provided by investing activities of $0.8 billion
during 2022. This change was due primarily to the payments for the NJOY Transaction in 2023, partially offset by higher proceeds
received from the sale of IQOS System commercialization rights.
Capital expenditures for 2023 decreased 4.4% to $196 million. We expect capital expenditures for 2024 to be in the range of $175
million to $225 million, which are expected to be funded from operating cash flows.
Cash Provided by/Used in Financing Activities
During 2023, net cash used in financing activities was $8.4 billion compared with $9.5 billion during 2022. This decrease was due
primarily to the issuance of long-term debt in 2023 and lower share repurchases, partially offset by higher repayments of long-term debt
and higher dividends paid on our common stock.
New Accounting Guidance Not Yet Adopted
See Note 2 for a discussion of issued accounting guidance applicable to, but not yet adopted by, us.
Contingencies
See Note 19 and Item 3 for a discussion of contingencies.
Supplemental Guarantor Financial Information
PM USA (“Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc. (“Parent”), has guaranteed the Parent’s obligations
under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper
program (“Guarantees”). Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the
payment and performance of the Parent’s obligations under the guaranteed debt instruments (“Obligations”), subject to release under
certain customary circumstances as noted below.
The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of the Obligations. The liability of the Guarantor under the Guarantees is absolute and unconditional irrespective of: any lack
of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time,
manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any
consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other
circumstance that might otherwise constitute a defense available to, or a discharge of, the Parent or the Guarantor.
47
47
Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent transfer law, the Guarantees could be
voided, or claims in respect of the Guarantees could be subordinated to the debts of the Guarantor, if, among other things, the Guarantor,
at the time it incurred the Obligations evidenced by the Guarantees:
▪
▪
received less than reasonably equivalent value or fair consideration therefor; and
either:
▪
▪
▪
was insolvent or rendered insolvent by reason of such occurrence;
was engaged in a business or transaction for which the assets of the Guarantor constituted unreasonably small capital; or
intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
In addition, under such circumstances, the payment of amounts by the Guarantor pursuant to the Guarantees could be voided and
required to be returned to the Guarantor, or to a fund for the benefit of the Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding
with respect to the foregoing. Generally, however, the Guarantor would be considered insolvent if:
▪
▪
▪
the sum of its debts, including contingent liabilities, was greater than the saleable value of its assets, all at a fair valuation;
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute and mature; or
it could not pay its debts as they become due.
To the extent the Guarantees are voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of the
guaranteed debt obligations would not have any claim against the Guarantor and would be creditors solely of the Parent.
The obligations of the Guarantor under the Guarantees are limited to the maximum amount as will not result in the Guarantor’s
obligations under the Guarantees constituting a fraudulent transfer or conveyance, after giving effect to such maximum amount and all
other contingent and fixed liabilities of the Guarantor that are relevant under Bankruptcy Law, the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to the Guarantees. For this purpose,
“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
The Guarantor will be unconditionally released and discharged from the Obligations upon the earliest to occur of:
▪
▪
▪
▪
the date, if any, on which the Guarantor consolidates with or merges into the Parent or any successor;
the date, if any, on which the Parent or any successor consolidates with or merges into the Guarantor;
the payment in full of the Obligations pertaining to such Guarantees; and
the rating of the Parent’s long-term senior unsecured debt by S&P of A or higher.
The Parent is a holding company; therefore, its access to the operating cash flows of its wholly owned subsidiaries consists of cash
received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. Neither
the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-Guarantor Subsidiaries”) are
limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.
48
48
The following tables include summarized financial information for the Parent and the Guarantor. Transactions between the Parent and
the Guarantor (including investment and intercompany balances as well as equity earnings) have been eliminated. The Parent’s and the
Guarantor’s intercompany balances with Non-Guarantor Subsidiaries have been presented separately. This summarized financial
information is not intended to present the financial position or results of operations of the Parent or the Guarantor in accordance with
GAAP.
Summarized Balance Sheets
(in millions of dollars)
Assets
Due from Non-Guarantor Subsidiaries
Other current assets
Total current assets
Due from Non-Guarantor Subsidiaries
Other assets
Total non-current assets
Liabilities
Due to Non-Guarantor Subsidiaries
Other current liabilities
Total current liabilities
Total non-current liabilities
Net revenues
Gross profit
Summarized Statements of Earnings (Losses)
(in millions of dollars)
December 31, 2023
Parent
Guarantor
$
$
$
$
$
$
$
— $
4,052
4,052 $
6,561 $
9,797
16,358 $
2,548 $
3,708
6,256 $
27,876 $
316
678
994
—
1,334
1,334
1,081
3,665
4,746
590
For the Year Ended December 31, 2023
Parent (1)
Guarantor (2)
$
— $
—
20,608
11,416
Net earnings (losses)
7,579
(1) For the year ended December 31, 2023, net earnings (losses) include an approximate $10.8 billion loss related to the cancellation of certain interests
in a non-guarantor subsidiary, $309 million of intercompany interest income from non-guarantor subsidiaries and $389 million of interest expense
from non-guarantor subsidiaries.
(11,433)
(2) For the year ended December 31, 2023, net earnings (losses) include $245 million of intercompany interest income from non-guarantor subsidiaries.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
The fair value of our long-term debt, all of which is fixed-rate debt, is subject to fluctuations resulting primarily from changes in market
interest rates. The following table provides the fair value of our long-term debt and the change in fair value based on a 1% increase or
decrease in market interest rates at December 31:
(in billions)
Fair value
Decrease in fair value from a 1% increase in market interest rates
Increase in fair value from a 1% decrease in market interest rates
$
2023
2022
24.4 $
1.9
2.2
22.9
1.7
2.0
We expect interest rates on borrowings under our Credit Agreement to be based on the Term Secured Overnight Financing Rate, plus a
percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s and S&P. The applicable percentage
for borrowings under our Credit Agreement at December 31, 2023 was 1.0% based on our long-term senior unsecured debt ratings on
that date. At December 31, 2023 and 2022, we had no borrowings under our Credit Agreement or prior credit agreement, respectively.
49
49
Item 8. Financial Statements and Supplementary Data.
Altria Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions of dollars)
________________________
at December 31,
Assets
Cash and cash equivalents
Receivables:
Receivable from the sale of IQOS System commercialization rights
Other
Inventories:
Leaf tobacco
Other raw materials
Work in process
Finished product
Income taxes
Other current assets
Total current assets
Property, plant and equipment, at cost:
Land and land improvements
Buildings and building equipment
Machinery and equipment
Construction in progress
Less accumulated depreciation
Goodwill
Other intangible assets, net
Investments in equity securities ($0 million and $250 million at December 31, 2023 and 2022,
respectively, measured at fair value)
Other assets
Total Assets
See notes to consolidated financial statements.
2023
2022
$
3,686 $
4,030
—
71
649
204
22
340
1,215
496
117
5,585
123
1,535
2,684
240
4,582
2,930
1,652
6,791
13,686
10,011
845
1,721
48
704
186
24
266
1,180
103
138
7,220
123
1,478
2,578
248
4,427
2,819
1,608
5,177
12,384
9,600
965
$
38,570 $
36,954
50
50
716
582
$
1,121 $
599
552
1,556
2023
2022
2023
2023
1,121 $
1,121 $
582
582
$
$
716
716
2,563
2,563
1,902
1,902
2,700
2,700
1,735
1,735
11,319
11,319
25,112
25,112
2,799
2,799
130
130
1,079
1,079
—
—
1,621
1,621
42,060
42,060
935
935
5,906
5,906
31,094
31,094
(2,673)
(2,673)
(38,802)
(38,802)
(3,540)
(3,540)
50
50
(3,490)
(3,490)
38,570 $
38,570 $
$
$
2022
2022
1,556
1,556
552
552
599
599
2,925
2,925
1,299
1,299
—
—
1,685
1,685
8,616
8,616
25,124
25,124
2,897
2,897
133
133
1,083
1,083
2,700
2,700
324
324
40,877
40,877
935
935
5,887
5,887
29,792
29,792
(2,771)
(2,771)
(37,816)
(37,816)
(3,973)
(3,973)
50
50
(3,923)
(3,923)
36,954
36,954
Altria Group, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
Altria Group, Inc. and Subsidiaries
____________________________________________
(in millions of dollars, except share and per share data)
Consolidated Balance Sheets (Continued)
(in millions of dollars, except share and per share data)
____________________________________________
Consolidated Balance Sheets (Continued)
(in millions of dollars, except share and per share data)
____________________________________________
Altria Group, Inc. and Subsidiaries
Marketing
Accrued liabilities:
Accounts payable
Current portion of long-term debt
Liabilities
at December 31,
at December 31,
Liabilities
at December 31,
Liabilities
Current portion of long-term debt
Current portion of long-term debt
Accounts payable
Accounts payable
Accrued liabilities:
Accrued liabilities:
Marketing
Marketing
Settlement charges
Settlement charges
Other
Other
Deferred gain from the sale of IQOS System commercialization rights
Dividends payable
Deferred gain from the sale of IQOS System commercialization rights
Dividends payable
Total current liabilities
Total current liabilities
Long-term debt
Long-term debt
Deferred income taxes
Deferred income taxes
Accrued pension costs
Accrued pension costs
Accrued postretirement health care costs
Accrued postretirement health care costs
Deferred gain from the sale of IQOS System commercialization rights
Deferred gain from the sale of IQOS System commercialization rights
Other liabilities
Other liabilities
Total liabilities
Total liabilities
Contingencies (Note 19)
Contingencies (Note 19)
Stockholders’ Equity (Deficit)
Stockholders’ Equity (Deficit)
Common stock, par value $0.33 1/3 per share
(2,805,961,317 shares issued)
Common stock, par value $0.33 1/3 per share
Additional paid-in capital
(2,805,961,317 shares issued)
Additional paid-in capital
Earnings reinvested in the business
Earnings reinvested in the business
Accumulated other comprehensive losses
Accumulated other comprehensive losses
Cost of repurchased stock
Cost of repurchased stock
(1,042,499,542 shares at December 31, 2023 and
1,020,427,195 shares at December 31, 2022)
(1,042,499,542 shares at December 31, 2023 and
1,020,427,195 shares at December 31, 2022)
Total stockholders’ equity (deficit) attributable to Altria
Total stockholders’ equity (deficit) attributable to Altria
Noncontrolling interests
Noncontrolling interests
Total stockholders’ equity (deficit)
Total stockholders’ equity (deficit)
Total Liabilities and Stockholders’ Equity (Deficit)
Total Liabilities and Stockholders’ Equity (Deficit)
See notes to consolidated financial statements.
See notes to consolidated financial statements.
51
Altria Group, Inc. and Subsidiaries
Consolidated Statements of Earnings
(in millions of dollars, except per share data)
Altria Group, Inc. and Subsidiaries
____________________________________
Consolidated Statements of Earnings
(in millions of dollars, except per share data)
____________________________________
for the years ended December 31,
Net revenues
Cost of sales
for the years ended December 31,
Excise taxes on products
Net revenues
Cost of sales
Marketing, administration and research costs
Excise taxes on products
Gross profit
Operating income
Gross profit
Operating income
Interest and other debt expense, net
Marketing, administration and research costs
Loss on early extinguishment of debt
Net periodic benefit income, excluding service cost
Interest and other debt expense, net
(Income) losses from investments in equity securities
Loss on early extinguishment of debt
Loss on Cronos-related financial instruments
Net periodic benefit income, excluding service cost
(Income) losses from investments in equity securities
Provision for income taxes
Loss on Cronos-related financial instruments
Earnings before income taxes
Net earnings
Earnings before income taxes
Per share data:
Provision for income taxes
Basic and diluted earnings per share
Net earnings
Per share data:
See notes to consolidated financial statements.
Basic and diluted earnings per share
See notes to consolidated financial statements.
2023
$ 24,483
6,218
2023
3,981
$ 24,483
14,284
6,218
2,737
3,981
11,547
14,284
989
2,737
—
11,547
(127)
989
(243)
—
—
(127)
10,928
(243)
2,798
—
8,130
10,928
2,798
4.57
8,130
$
$
$
2022
$ 25,096
6,442
2022
4,408
$ 25,096
14,246
6,442
2,327
4,408
11,919
14,246
1,058
2,327
—
11,919
(184)
1,058
3,641
—
15
(184)
7,389
3,641
1,625
15
5,764
7,389
1,625
3.19
5,764
$
$
$
2021
$ 26,013
7,119
2021
4,902
$ 26,013
13,992
7,119
2,432
4,902
11,560
13,992
1,162
2,432
649
11,560
(202)
1,162
5,979
649
148
(202)
3,824
5,979
1,349
148
2,475
3,824
1,349
1.34
2,475
$
$
$
$
4.57
$
3.19
$
1.34
52
52
Altria Group, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
(in millions of dollars)
_______________________
Altria Group, Inc. and Subsidiaries
2023
Consolidated Statements of Comprehensive Earnings
8,130
(in millions of dollars)
_______________________
$
2022
5,764
176
2022
143
5,764
(34)
285
176
6,049
143
(34)
285
6,049
$
$
$
$
2021
2,475
808
2021
426
2,475
51
1,285
808
3,760
426
51
1,285
3,760
$
$
$
$
(57)
2023
174
8,130
(19)
98
(57)
8,228
174
(19)
98
8,228
$
$
$
for the years ended December 31,
Net earnings
Other comprehensive earnings (losses), net of deferred income taxes:
for the years ended December 31,
Benefit plans
ABI
Net earnings
Currency translation adjustments and other
Other comprehensive earnings (losses), net of deferred income taxes:
Other comprehensive earnings (losses), net of deferred income taxes
Comprehensive earnings
Benefit plans
ABI
Currency translation adjustments and other
See notes to consolidated financial statements.
Other comprehensive earnings (losses), net of deferred income taxes
Comprehensive earnings
See notes to consolidated financial statements.
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53
Altria Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions of dollars)
Altria Group, Inc. and Subsidiaries
__________________
Consolidated Statements of Cash Flows
(in millions of dollars)
__________________
for the years ended December 31,
Cash Provided by (Used in) Operating Activities
$
$
Net earnings
Adjustments to reconcile net earnings to operating cash flows:
for the years ended December 31,
Cash Provided by (Used in) Operating Activities
Net earnings
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization
Deferred income tax provision (benefit)
Unrecognized tax benefit (1)
Depreciation and amortization
(Income) losses from investments in equity securities
Deferred income tax provision (benefit)
Dividends from ABI
Unrecognized tax benefit (1)
Loss on Cronos-related financial instruments
(Income) losses from investments in equity securities
Loss on early extinguishment of debt
Dividends from ABI
Cash effects of changes: (2)
Loss on Cronos-related financial instruments
Receivables
Loss on early extinguishment of debt
Inventories
Cash effects of changes: (2)
Accounts payable
Receivables
Income taxes
Inventories
Accrued liabilities and other current assets
Accounts payable
Accrued settlement charges
Income taxes
Pension plan contributions
Accrued liabilities and other current assets
Pension and postretirement, net
Accrued settlement charges
Other, net
Pension plan contributions
Net cash provided by (used in) operating activities
Pension and postretirement, net
Other, net
Cash Provided by (Used in) Investing Activities
Net cash provided by (used in) operating activities
Capital expenditures
Proceeds from the sale of IQOS System commercialization rights
Cash Provided by (Used in) Investing Activities
2023
2022
2021
8,130
2023
$
5,764
2022
$
2,475
2021
$
272
8,130
(230)
1,111
272
(243)
(230)
163
1,111
—
(243)
—
163
—
6
—
(15)
38
6
6
(15)
280
38
(362)
6
(20)
280
(136)
(362)
287
(20)
9,287
(136)
287
9,287
(196)
1,700
$
226
5,764
(947)
16
226
3,641
(947)
104
16
15
3,641
—
104
15
(21)
—
14
92
(21)
(118)
14
(129)
92
(424)
(118)
(20)
(129)
(156)
(424)
199
(20)
8,256
(156)
199
8,256
(205)
1,000
244
2,475
(1,160)
(21)
244
5,979
(1,160)
119
(21)
148
5,979
649
119
148
(18)
649
57
163
(18)
(149)
57
165
163
(215)
(149)
(26)
165
(175)
(215)
170
(26)
8,405
(175)
170
8,405
(169)
—
Proceeds from the Ste. Michelle Transaction, net of cash transferred
Capital expenditures
Acquisition of NJOY, net of cash acquired
Proceeds from the sale of IQOS System commercialization rights
Other, net
Proceeds from the Ste. Michelle Transaction, net of cash transferred
Net cash provided by (used in) investing activities
1,176
(169)
—
—
205
1,176
1,212
—
(1) 2023 relates to unrecognized tax benefit from the ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in
205
—
(196)
(2,751)
1,700
(36)
—
(1,283)
(2,751)
Acquisition of NJOY, net of cash acquired
—
(205)
—
1,000
(13)
—
782
—
Other, net
(36)
(13)
JUUL. For further discussion, see Note 15. Income Taxes.
1,212
(2) 2023 amounts are net of the effects from the NJOY Transaction. For further details, see Note 3. Acquisition of NJOY. 2021 amounts reflect changes from operations for
(1) 2023 relates to unrecognized tax benefit from the ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in
Net cash provided by (used in) investing activities
Ste. Michelle prior to the Ste. Michelle Transaction.
(1,283)
782
JUUL. For further discussion, see Note 15. Income Taxes.
See notes to consolidated financial statements.
(2) 2023 amounts are net of the effects from the NJOY Transaction. For further details, see Note 3. Acquisition of NJOY. 2021 amounts reflect changes from operations for
Ste. Michelle prior to the Ste. Michelle Transaction.
See notes to consolidated financial statements.
54
54
Altria Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
Altria Group, Inc. and Subsidiaries
__________________
Consolidated Statements of Cash Flows (Continued)
(in millions of dollars)
__________________
2023
for the years ended December 31,
Cash Provided by (Used in) Financing Activities
2022
2021
for the years ended December 31,
Cash Provided by (Used in) Financing Activities
Proceeds from short-term borrowings
Repayment of short-term borrowings
Long-term debt issued
Proceeds from short-term borrowings
Long-term debt repaid
Repayment of short-term borrowings
Repurchases of common stock
Long-term debt issued
Dividends paid on common stock
Long-term debt repaid
Premiums and fees related to early extinguishment of debt
Repurchases of common stock
Other, net
Dividends paid on common stock
Premiums and fees related to early extinguishment of debt
Other, net
Increase (decrease)
Cash, cash equivalents and restricted cash:
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Cash, cash equivalents and restricted cash:
Balance at beginning of year
Balance at end of year
Increase (decrease)
Balance at beginning of year
Supplemental cash flow information:
Balance at end of year
Cash paid:
Supplemental cash flow information:
Interest
Income taxes
Cash paid:
Non-cash investing activities:
2,000
2023
(2,000)
998
2,000
(1,566)
(2,000)
(1,000)
998
(6,779)
(1,566)
—
(1,000)
(27)
(6,779)
(8,374)
—
(27)
(370)
(8,374)
4,091
3,721
(370)
4,091
3,721
1,116
1,890
1,116
—
1,890
$
$
$
$
$
$
$
$
$
—
2022
—
—
—
(1,105)
—
(1,825)
—
(6,599)
(1,105)
—
(1,825)
(12)
(6,599)
(9,541)
—
(12)
(503)
(9,541)
4,594
4,091
(503)
4,594
4,091
1,119
2,657
1,119
1,700
2,657
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
2021
—
5,472
—
(6,542)
—
(1,675)
5,472
(6,446)
(6,542)
(623)
(1,675)
(215)
(6,446)
(10,029)
(623)
(215)
(412)
(10,029)
5,006
4,594
(412)
5,006
4,594
1,189
2,673
1,189
—
2,673
—
2021
4,544
—
2021
50
4,544
4,594
—
50
$
Interest
Deferred proceeds from the sale of IQOS System commercialization rights $
$
Income taxes
Non-cash investing activities:
The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on our
$
consolidated balance sheets:
Deferred proceeds from the sale of IQOS System commercialization rights $
1,700
—
$
at December 31,
The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on our
Cash and cash equivalents
$
consolidated balance sheets:
Restricted cash included in other current assets
at December 31,
Restricted cash included in other assets
Cash and cash equivalents
3,686
4,030
2023
2022
$
$
5
2023
30
3,686
3,721
5
$
$
15
2022
46
4,030
4,091
15
$
$
Cash, cash equivalents and restricted cash
Restricted cash included in other current assets
(1) Restricted cash consisted primarily of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 19.
Restricted cash included in other assets
46
30
Contingencies.
Cash, cash equivalents and restricted cash
$
3,721
$
4,091
$
4,594
See notes to consolidated financial statements.
(1) Restricted cash consisted primarily of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 19.
Contingencies.
See notes to consolidated financial statements.
55
55
Altria Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity (Deficit)
(in millions of dollars, except per share data)
____________________________________
Attributable to Altria
Common
Stock
Additional
Paid-in
Capital
Earnings
Reinvested in
the Business
Accumulated
Other
Comprehensive
Losses
Cost of
Repurchased
Stock
Non-
controlling
Interests
Total
Stockholders’
Equity
(Deficit)
Balances, December 31, 2020
$
935 $
5,910 $
34,679 $
(4,341) $
(34,344) $
86 $
Net earnings (losses)
Other comprehensive earnings (losses), net
of deferred income taxes
Stock award activity
Cash dividends declared ($3.52 per share)
Repurchases of common stock
Other (1)
Balances, December 31, 2021
Net earnings (losses)
Other comprehensive earnings (losses), net
of deferred income taxes
Stock award activity
Cash dividends declared ($3.68 per share)
Repurchases of common stock
Other (1)
Balances, December 31, 2022
Net earnings (losses)
Other comprehensive earnings (losses), net
of deferred income taxes
Stock award activity
Cash dividends declared ($3.84 per share)
Repurchases of common stock
Other
—
—
—
—
—
—
935
—
—
—
—
—
—
935
—
—
—
—
—
—
—
—
24
—
—
(77)
5,857
—
—
30
—
—
—
5,887
—
—
19
—
—
—
2,475
—
—
(6,490)
—
—
30,664
5,764
—
—
(6,636)
—
—
29,792
8,130
—
—
(6,828)
—
—
—
1,285
—
—
—
—
—
—
13
—
(1,675)
(4)
—
—
—
—
—
(82)
(3,056)
(36,006)
—
285
—
—
—
—
—
—
15
—
(1,825)
—
(2,771)
(37,816)
—
98
—
—
—
—
—
—
22
—
(1,000)
(8)
—
—
—
—
—
—
50
50
—
—
—
—
—
—
2,925
2,471
1,285
37
(6,490)
(1,675)
(159)
(1,606)
5,764
285
45
(6,636)
(1,825)
50
(3,923)
8,130
98
41
(6,828)
(1,000)
(8)
Balances, December 31, 2023
$
935 $
5,906 $
31,094 $
(2,673) $
(38,802) $
50 $
(3,490)
(1) Represents the non-cash contribution made by JTIUH to Horizon in 2022 and the purchase of the remaining noncontrolling interest in Helix in 2021. For additional
information, see Note 1. Background and Basis of Presentation.
See notes to consolidated financial statements.
56
56
Altria Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
_______________________________
Note 1. Background and Basis of Presentation
When used in these notes, the terms “Altria,” “we,” “us” and “our” refer to either (i) Altria Group, Inc. and its consolidated
subsidiaries or (ii) Altria Group, Inc. only and not its consolidated subsidiaries, as appropriate in the context.
Background: At December 31, 2023, our wholly owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is
▪
engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the
manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly owned subsidiary of PM USA; UST LLC (“UST”),
which through its wholly owned subsidiary U.S. Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale
of moist smokeless tobacco products (“MST”) and snus products; Helix Innovations LLC (“Helix”), which operates in the United States
and Canada, and Helix Innovations GmbH and its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are
engaged in the manufacture and sale of oral nicotine pouches; and NJOY, LLC (“NJOY”), which is engaged in the manufacture and sale
of e-vapor products. Other wholly owned subsidiaries included Altria Group Distribution Company (“AGDC”), which provides sales
and distribution services to our domestic operating companies; and Altria Client Services LLC (“ALCS”), which provides various
support services to our companies in areas such as legal, regulatory, research and product development, consumer engagement, finance,
human resources and external affairs. Our access to the operating cash flows of our subsidiaries consists of cash received from the
payment of dividends and distributions, and the payment of interest on intercompany loans by our subsidiaries. At December 31, 2023,
our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions
with respect to their equity interests.
As discussed in Note 3. Acquisition of NJOY, on June 1, 2023, we completed our acquisition of NJOY Holdings, Inc. (“NJOY
Holdings”), the parent of NJOY. As a result of the acquisition, NJOY became a wholly owned subsidiary of Altria.
In March 2023, we entered into a stock transfer agreement with JUUL Labs, Inc. (“Stock Transfer Agreement”) pursuant to which we
transferred to JUUL Labs, Inc. (“JUUL”) all of our beneficially owned JUUL equity securities. In exchange, we received a non-
exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property (“JUUL Heated Tobacco IP”).
In October 2022, we entered into a joint venture with JTI (US) Holding, Inc. (“JTIUH”), a subsidiary of Japan Tobacco Inc., for the U.S.
marketing and commercialization of heated tobacco stick (“HTS”) products. The joint venture entity, Horizon Innovations LLC
(“Horizon”), is structured to exist in perpetuity and is responsible for the U.S. marketing and commercialization of HTS products owned
by either party. At December 31, 2023 we owned a 75% economic interest in Horizon; JTIUH owned the remaining 25% economic
interest.
In October 2021, we sold International Wine & Spirits Ltd. (“IWS”), which included Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”),
in an all-cash transaction with a net purchase price of approximately $1.2 billion and the assumption of certain liabilities of IWS and its
subsidiaries (“Ste. Michelle Transaction”).
At December 31, 2023, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc. (“Cronos”).
For further discussion of our investments in equity securities, see Note 7. Investments in Equity Securities.
▪
Basis of Presentation: Our consolidated financial statements include Altria, as well as our wholly owned and majority-owned
subsidiaries. We account for our investments in equity securities in which we have the ability to exercise significant influence over the
operating and financial policies of the investee, including ABI and Cronos, under the equity method of accounting using a one-quarter
lag. We accounted for our former investment in the equity securities of JUUL at fair value. All intercompany transactions and balances
have been eliminated.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent liabilities at the dates of our financial statements and the reported amounts of net revenues and expenses during
the reporting periods. Significant estimates and assumptions include, among other things, pension and benefit plan assumptions, lives
and valuation assumptions for goodwill, other intangible assets and investments in equity securities, marketing programs and income
taxes. Actual results could differ from those estimates.
Certain immaterial prior year amounts have been reclassified to conform with the current year’s presentation.
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). This guidance updates how an entity
recognizes and measures contract assets and contract liabilities acquired in a business combination. Our adoption of ASU No. 2021-08
had no impact on our consolidated financial statements or related disclosures.
57
57
Additionally, on January 1, 2023, we adopted ASU 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of
Supplier Finance Program Obligations (“ASU No. 2022-04”). This guidance requires that a buyer in a supplier finance program
disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the
program’s nature, activity during the period, changes from period to period and potential magnitude. For further discussion, see Note 5.
Supplier Financing.
Note 2. Summary of Significant Accounting Policies
Cash and Cash Equivalents: Cash equivalents include demand deposits with banks and all highly liquid investments with
▪
original maturities of three months or less. We record cash equivalents at cost plus accrued interest, which approximates fair value.
▪
Depreciation, Amortization and Impairment Testing: We record property, plant and equipment at historical costs and
depreciate by the straight-line method over the estimated useful lives of the assets. We depreciate machinery and equipment over
periods up to 20 years, and buildings and building improvements over periods up to 50 years. We amortize definite-lived intangible
assets over their estimated useful lives up to 25 years.
We review long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in business
circumstances indicate that the carrying value of the assets may not be fully recoverable. We perform undiscounted operating cash flow
analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use,
we group assets and liabilities at the lowest level for which cash flows are separately identifiable. If we determine that an impairment
exists, any related impairment loss is calculated based on fair value. We base impairment losses on assets to be disposed of, if any, on
the estimated proceeds to be received, less costs of disposal. We also review the estimated remaining useful lives of long-lived assets
whenever events or changes in business circumstances indicate the lives may have changed.
We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment, and more frequently if
an event occurs or circumstances change that would require us to perform an interim review. We have the option of first performing a
qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible
asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. If
necessary, we will perform a single step quantitative impairment test. Additionally, we have the option to unconditionally bypass the
qualitative assessment and perform a single step quantitative assessment. If the carrying value of a reporting unit that includes goodwill
exceeds its fair value, which is determined using discounted cash flows, goodwill is considered impaired. We measure the amount of
impairment loss as the difference between the carrying value and the fair value of a reporting unit; however, the amount of the
impairment loss is limited to the total amount of goodwill allocated to a reporting unit. If the carrying value of an indefinite-lived
intangible asset exceeds its fair value, which is determined using discounted cash flows, we consider the intangible asset impaired and
reduce the carrying value to fair value in the period identified.
Derivative Financial Instruments: From time to time, we enter into derivatives to mitigate the potential impact of certain
▪
market risks, including foreign currency exchange rate risk. We use various types of derivative financial instruments, including forward
contracts, options and swaps.
We record derivative financial instruments at fair value on the consolidated balance sheets as either assets or liabilities. We designate
derivative financial instruments that qualify for hedge accounting as either fair value hedges, cash flow hedges or net investment hedges
at the inception of the contracts. For fair value hedges, we record changes in the fair value of the derivative, as well as the offsetting
changes in the fair value of the hedged item, in the consolidated statements of earnings each period. For cash flow hedges, we record
changes in the fair value of the derivative each period in accumulated other comprehensive earnings (losses) and reclassify changes to
the consolidated statements of earnings in the same periods in which operating results are affected by the respective hedged item. For
net investment hedges, we record changes in the fair value of the derivative or foreign currency transaction gains or losses on a
nonderivative hedging instrument in accumulated other comprehensive earnings (losses) to offset the change in the value of the net
investment being hedged. Such amounts remain in accumulated other comprehensive earnings (losses) until the complete or
substantially complete liquidation of the underlying foreign operations occurs for investments in foreign entities accounted for under the
equity method of accounting. We classify cash flows from hedging instruments in the same manner as the respective hedged item in the
consolidated statements of cash flows.
To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, is expected to be
highly effective at offsetting changes in the fair value of the hedged risk during the period that the hedge is designated. We formally
designate and document, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management
objective, the strategy for undertaking the hedge transaction and method for assessing hedge effectiveness. Additionally, for qualified
hedges of forecasted transactions, if it becomes probable that a forecasted transaction will not occur, we would no longer consider the
hedge effective and would record all of the derivative gains and losses in the consolidated statement of earnings in the current period.
58
58
For financial instruments that are not designated as hedging instruments or do not qualify for hedge accounting, we record changes in
fair value in the consolidated statement of earnings each period. We do not enter into or hold derivative financial instruments for trading
or speculative purposes.
▪
Employee Benefit Plans: We provide a range of benefits to certain employees and retired employees, including pension,
postretirement health care and postemployment benefits. We record annual amounts relating to these plans based on calculations
specified by GAAP, which include various actuarial assumptions as to discount rates, assumed rates of return on plan assets, mortality,
compensation increases, turnover rates and health care cost trend rates.
We recognize the funded status of our defined benefit pension and other postretirement plans on the consolidated balance sheets and
record as a component of other comprehensive earnings (losses), net of deferred income taxes, the gains or losses and prior service costs
or credits that have not been recognized as components of net periodic benefit cost (income). We subsequently amortize the gains or
losses and prior service costs or credits recorded as components of other comprehensive earnings (losses) into net periodic benefit cost
(income) in future years.
▪
Environmental Costs: We are subject to laws and regulations relating to the protection of the environment. We provide for
expenses associated with environmental remediation obligations on an undiscounted basis when such amounts are probable and can be
reasonably estimated. We adjust such accruals as new information develops or circumstances change.
Compliance with environmental laws and regulations, including the payment of any remediation and compliance costs or damages and
the making of related expenditures, has not had a material adverse effect on our consolidated results of operations, capital expenditures,
financial position or cash flows. See Note 19. Contingencies - Environmental Regulation.
Fair Value Measurements: We measure certain assets and liabilities at fair value. Fair value is defined as the exchange price
▪
that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date. We use a fair value hierarchy, which
gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs used to measure fair value are:
Level 1
Level 2
Level 3
Unadjusted quoted prices in active markets for identical assets or liabilities.
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
▪
Contingencies for a further discussion of guarantees.
Guarantees: We recognize a liability for the fair value of the obligation of qualifying guarantee activities. See Note 19.
▪
Income Taxes: Significant judgment is required in determining income tax provisions and in evaluating tax positions.
We determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance
when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of
deferred tax assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the
character of the assets and the possible sources of taxable income of the appropriate character within the available carryback and
carryforward periods available under the tax law.
We recognize the financial statement benefit for uncertain income tax positions when it is more likely than not, based on the technical
merits, that the position will be sustained upon examination by taxing authorities. The amount recognized is measured as the largest
amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize accrued interest and penalties
associated with uncertain tax positions as part of the provision for income taxes in our consolidated statements of earnings.
Inventories: We use the last-in, first-out (“LIFO”) method to determine the cost of the majority of our inventories. We
▪
determine the cost of the remaining inventories using the first-in, first-out (“FIFO”) and average cost methods. We record inventories
that are measured using the LIFO method at the lower of cost or market. We state inventories that are measured using the FIFO and
average cost methods at the lower of cost and net realizable value. It is a generally recognized industry practice to classify leaf tobacco
inventories as a current asset although part of such inventories, because of the duration of the curing and aging process, ordinarily would
not be used within one year. We determined the cost of approximately 76% and 79% of our inventories at December 31, 2023 and 2022,
respectively, using the LIFO method. The recorded LIFO amounts of our inventories were approximately $0.7 billion lower than the
current cost of our inventories at December 31, 2023 and 2022.
Investments in Equity Securities: Investments in equity securities in which we have the ability to exercise significant
▪
influence over the operating and financial policies of the investee are accounted for under the equity method of accounting or the fair
value option. The election of the fair value option is irrevocable and is made on an investment by investment basis.
59
59
We elected to account for our investments in ABI and Cronos under the equity method of accounting. Our share of equity (income)
losses and other adjustments associated with these investments are included in (income) losses from investments in equity securities in
our consolidated statements of earnings. We report the carrying value for each of our investments in ABI and Cronos in investments in
equity securities on our consolidated balance sheets. We report equity method investments accounted for under the equity method of
accounting at cost and adjust these investments each period for our share of (income) losses and dividends paid, if any. We report our
share of ABI’s and Cronos’s results using a one-quarter lag because results are not available in time for us to record them in the
concurrent period. At the end of each reporting period, we review our investments accounted for under the equity method of accounting
for impairment by comparing the fair value of each of our investments to their carrying value. If the carrying value of an investment
exceeds its fair value and the loss in value is other than temporary, we consider the investment impaired, reduce its carrying value to its
fair value and record the impairment in our consolidated statements of earnings in the period identified. We use certain factors to make
this determination including (i) the duration and magnitude of the fair value decline, (ii) the financial condition and near-term prospects
of the investee and (iii) our intent and ability to hold our investment until recovery to its carrying value.
See Note 7. Investments in Equity Securities for additional information on our accounting policy for our former investment in JUUL.
Litigation Contingencies and Costs: We record provisions in our consolidated financial statements for pending litigation
▪
when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. We expense
litigation defense costs as incurred and include these costs in marketing, administration and research costs in our consolidated statements
of earnings. See Note 19. Contingencies.
▪
Marketing Costs: Our businesses promote their products with consumer incentives, trade promotions and consumer
engagement programs. These consumer incentive and trade promotion activities, which include discounts, coupons, rebates, in-store
display incentives and volume-based incentives, do not create a distinct deliverable and are, therefore, recorded as a reduction of
revenues. We make consumer engagement program payments to third parties. Our businesses expense these consumer engagement
programs, which include event marketing, as incurred, and such expenses are included in marketing, administration and research costs in
our consolidated statements of earnings. For interim reporting purposes, our businesses charge consumer engagement programs and
certain consumer incentive expenses to operations as a percentage of sales, based on estimated sales and related expenses for the full
year.
▪
Revenue Recognition: Our businesses generate substantially all of their revenue from sales contracts with customers. While
our businesses enter into separate sales contracts with each customer for each product type, all sales contracts are similarly structured.
These contracts create an obligation to transfer product to the customer. Our businesses satisfy all performance obligations within one
year; therefore, we expense costs to obtain contracts as incurred and do not disclose unsatisfied performance obligations. There is no
financing component because our businesses expect, at contract inception, that the period between when our businesses transfer product
to the customer and when the customer pays for that product will be one year or less.
Our businesses define net revenues as revenues, which include excise taxes and shipping and handling charges billed to customers, net of
cash discounts for prompt payment, sales returns (also referred to as returned goods) and sales incentives. Our businesses exclude from
the transaction price sales taxes and value-added taxes imposed at the time of sale.
Our businesses recognize revenues from sales contracts with customers upon shipment of goods when control of such products is
obtained by the customer. Our businesses determine that a customer obtains control of the product upon shipment when title of such
product and risk of loss transfers to the customer. Our businesses account for shipping and handling costs as fulfillment costs and such
amounts are classified as part of cost of sales in our consolidated statements of earnings. Our businesses record an allowance for
returned goods, based principally on historical volume and return rates, which is included in other accrued liabilities on our consolidated
balance sheets. Our businesses record sales incentives, which consist of consumer incentives and trade promotion activities, as a
reduction to revenues (a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end
of a period) based principally on historical volume, utilization and redemption rates. We include expected payments for sales incentives
in accrued marketing liabilities on our consolidated balance sheets.
Payment terms vary depending on product type. Our businesses consider payments received in advance of product shipment as deferred
revenue, which we include in other accrued liabilities on our consolidated balance sheets until revenue is recognized. PM USA receives
payment in advance of a customer obtaining control of the product. USSTC and Helix receive substantially all payments within one
business day of a customer obtaining control of the product. NJOY receives substantially all payments within 30 days of a customer
obtaining control of the product. We include amounts due from customers in receivables on our consolidated balance sheets.
Supplier Financing: We facilitate a voluntary supplier financing program under which participating suppliers may elect to sell
▪
receivables due from us to a third-party financial institution. Our payments are made on the terms originally negotiated with the
supplier, and we have no economic interest in a supplier’s sale of a receivable. All outstanding balances under the supplier financing
program are recorded in accounts payable on our consolidated balance sheets.
60
60
▪
applicable to, but not yet adopted by, us:
New Accounting Guidance Not Yet Adopted: The following table provides a description of issued accounting guidance
Standards
ASU 2022-03 Fair
Value Measurement
(Topic 820): Fair
Value Measurement of
Equity Securities
Subject to Contractual
Sale Restrictions
ASU 2023-07 Segment
Reporting (Topic 280):
Improvements to
Reportable Segment
Disclosures
ASU 2023-09 Income
Taxes (Topic 740):
Improvements to
Income Tax
Disclosures
Description
The guidance clarifies that a contractual
restriction on the sale of an equity security is
not considered part of the unit of account of
the equity security and, therefore, is not
considered in measuring fair value. The
amendments also specify required disclosures
for equity securities subject to contractual sale
restrictions.
The guidance will require disclosure of
incremental segment information on an annual
and interim basis.
The guidance will require additional income
tax disclosures, primarily related to the rate
reconciliation and income taxes paid
information.
Note 3. Acquisition of NJOY
Effective Date for Public Entity
The guidance is effective for fiscal
years, and interim periods within
those fiscal years, beginning after
December 15, 2023.
Effect on Financial Statements
We do not expect our adoption of
this guidance to have a material
impact on our consolidated financial
statements and related disclosures.
The guidance is effective for fiscal
years beginning after December 15,
2023, and interim periods within
fiscal years beginning after December
15, 2024.
The guidance is effective for fiscal
years beginning after December 15,
2024.
We are in the process of evaluating
the impact of this guidance on our
consolidated financial statements and
related disclosures.
We are in the process of evaluating
the impact of this guidance on our
consolidated financial statements and
related disclosures.
On June 1, 2023, we acquired NJOY Holdings (“NJOY Transaction”), which provided us with full global ownership of NJOY’s e-vapor
product portfolio, including NJOY ACE, currently the only pod-based e-vapor product with market authorizations from the U.S. Food
and Drug Administration (“FDA”). The total consideration for the NJOY Transaction of approximately $2.9 billion, consisted of
approximately $2.75 billion in cash payments (net of cash acquired) plus the fair value of up to $500 million in additional cash payments
that are contingent on receipt of FDA authorizations with respect to certain NJOY products. The fair value of these contingent payments
on the acquisition date and at December 31, 2023 was approximately $130 million, which is included in the total consideration.
We funded the NJOY Transaction cash payments through a combination of a $2.0 billion term loan facility, the issuance of commercial
paper and available cash. For further discussion regarding the term loan facility, see Note 9. Short-Term Borrowings and Borrowing
Arrangements.
We accounted for this acquisition as a business combination. NJOY’s financial position and results of operations beginning June 1,
2023 have been consolidated with our consolidated financial results and included in the all other category. See Note 16. Segment
Reporting.
The fair value estimates of the assets acquired and liabilities assumed are preliminary and subject to adjustments during the measurement
period (up to one year following the acquisition date). The primary areas of accounting for the NJOY Transaction that are not yet
finalized relate to the fair value of certain intangible assets acquired, contingent liabilities, residual goodwill and any related tax impact.
During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained
about facts and circumstances that existed as of the NJOY Transaction date, that, if known, would have resulted in revised values for
these items as of that date. The impact of all changes, if any, that do not qualify as measurement period adjustments will be included in
current period earnings.
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61
The following amounts represent the preliminary estimates for purchase price allocation to assets acquired and liabilities assumed in the
NJOY Transaction, which will be finalized by the end of the measurement period:
(in millions)
Cash and cash equivalents
Receivables
Inventories
Other assets
Property, plant and equipment
Other intangible assets:
Developed technology (amortizable)
Trademarks (amortizable)
Supplier agreements (amortizable)
Accounts payable
Accrued liabilities
Deferred income taxes
Total identifiable net assets
Total consideration
Goodwill
$
$
22
7
19
7
16
1,000
230
180
(7)
(20)
(167)
1,287
2,901
1,614
The excess of the total consideration over the identifiable net assets acquired in the NJOY Transaction primarily reflects the value of
future growth opportunities in the e-vapor category. None of the goodwill or other intangible assets is deductible for tax purposes.
The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included volume growth
rates, operating margins, the assessment of acquired technology life cycles, discount rates, as well as other factors. We determined the
preliminary fair values of the identifiable intangibles assets using an income approach. The fair value measurements were primarily
based on significant inputs that are not observable in the market, such as discounted cash flow analyses, and thus are classified in Level
3 of the fair value hierarchy. We amortize the intangible assets over a weighted-average period of approximately 17 years.
In determining the estimated fair value of contingent payments, we made certain judgments, estimates and assumptions, the most
significant of which was the likelihood of certain potential regulatory outcomes. Contingent payments are classified in Level 3 of the
fair value hierarchy.
Costs incurred for the NJOY Transaction are recognized as expenses in the period in which the costs are incurred. For the year ended
December 31, 2023, we incurred costs related to the NJOY Transaction of $72 million, substantially all of which were acquisition-
related costs, consisting primarily of transaction costs and financing fees, which were included in corporate expense and interest and
other debt expense, net, respectively, in our consolidated statement of earnings.
Note 4. Revenues from Contracts with Customers
We disaggregate net revenues based on product type. For further discussion, see Note 16. Segment Reporting.
We calculate substantially all cash discounts, offered to customers for prompt payment, as a flat rate per unit based on agreed-upon
payment terms and record receivables net of the cash discounts on our consolidated balance sheets.
We record payments received by our businesses in advance of product shipment as deferred revenue. These payments are included in
other accrued liabilities on our consolidated balance sheets until control of such products is obtained by the customer. Deferred revenue
from contracts with customers was $258 million and $252 million at December 31, 2023 and 2022, respectively. When cash is received
in advance of product shipment, our companies satisfy their performance obligations within three days of receiving payment. At
December 31, 2023 and 2022, there were no differences between amounts recorded as deferred revenue from contracts with customers
and amounts subsequently recognized as revenue.
Receivables were $71 million and $48 million at December 31, 2023 and 2022, respectively, which in 2022 excluded the receivable
from the sale of the IQOS Tobacco Heating System (“IQOS System”) commercialization rights, discussed in Note 6. Goodwill and Other
Intangibles, net. At December 31, 2023 and 2022, there were no expected differences between amounts recorded and subsequently
received, and we did not record an allowance for credit losses against these receivables.
We record an allowance for returned goods, which is included in other accrued liabilities on our consolidated balance sheets. It is
USSTC’s policy to accept authorized sales returns from its customers for products that have passed the freshness date printed on product
62
62
packaging due to the limited shelf life of USSTC’s MST and snus products. We record estimated sales returns, which are based
principally on historical volume and return rates, as a reduction to revenues. Actual sales returns will differ from estimated sales returns
to the extent actual results differ from estimated assumptions. We reflect differences between actual and estimated sales returns in the
period in which the actual amounts become known. These differences, if any, have not had a material impact on our consolidated
financial statements. All returned goods are destroyed upon return and not included in inventory. Consequently, we do not record an
asset for USSTC’s right to recover goods from customers upon return.
Sales incentives include variable payments related to goods sold by our businesses. We include estimates of variable consideration as a
reduction to revenues upon shipment of goods to customers. The sales incentives that require significant estimates and judgments are as
follows:
▪
Price promotion payments- We make price promotion payments, substantially all of which are made to our retail partners to
incent the promotion of certain product offerings in select geographic areas.
▪ Wholesale and retail participation payments- We make payments to our wholesale and retail partners to incent merchandising
and sharing of sales data in accordance with our trade agreements.
These estimates primarily include estimated wholesale to retail sales volume and historical acceptance rates. Actual payments will differ
from estimated payments to the extent actual results differ from estimated assumptions. Differences between actual and estimated
payments are reflected in the period such information becomes available. These differences, if any, have not had a material impact on
our consolidated financial statements.
Note 5. Supplier Financing
We facilitate a voluntary supplier financing program through a third-party intermediary under which participating suppliers may elect to
sell receivables due from us to participating third-party financial institutions at the sole discretion of both the suppliers and the financial
institutions (“Program”). Our responsibility is limited to making payment on the terms originally negotiated with our supplier,
regardless of whether our supplier sells its receivable to a financial institution. We pay the third-party intermediary a nominal fee to
administer the Program. Under the terms of the agreement with our third-party intermediary, ALCS has a direct obligation to pay the
participating financial institutions or the participating suppliers when payment obligations are due, unless such obligations are satisfied
by the applicable ALCS affiliate. Additionally, Altria guarantees the obligations of ALCS to those parties. We do not enter into
agreements with any of the participating financial institutions in connection with the Program. The range of payment terms we negotiate
with our suppliers is consistent, irrespective of whether a supplier participates in the Program. The payment terms that we have with our
suppliers range up to 120 days.
We have no economic interest in a supplier’s sale of a receivable. Once a qualifying supplier elects to participate in the Program and
reaches an agreement with a participating third-party financial institution, the qualifying supplier elects which individual invoices they
sell to the financial institution.
All outstanding balances under the Program are recorded in accounts payable on our consolidated balance sheets, and the associated
payments are included in operating activities within our consolidated statements of cash flows.
A reconciliation of the beginning and ending confirmed outstanding obligations was as follows:
(in millions)
Confirmed outstanding obligations at beginning of year
Invoices confirmed during the year
Confirmed invoices paid during the year
Confirmed outstanding obligations at end of year
Note 6. Goodwill and Other Intangible Assets, net
Goodwill and other intangible assets, net, were as follows at December 31:
For the Year Ended
December 31, 2023
$
$
8
244
(133)
119
(in millions)
Smokeable products segment
Oral tobacco products segment
Other
Total
Goodwill
Other Intangible Assets, net
2023
2022
2023
2022
$
$
99 $
99 $
5,078
1,614
5,078
—
6,791 $
5,177 $
2,963 $
9,065
1,658
13,686 $
2,989
9,097
298
12,384
63
63
Other intangible assets consisted of the following at December 31:
(in millions)
Indefinite-lived intangible assets
Definite-lived intangible assets
Total other intangible assets
2023
2022
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
$
11,443 $
2,841
14,284 $
— $
598
598 $
11,443 $
1,411
12,854 $
—
470
470
At December 31, 2023, substantially all of our indefinite-lived intangible assets consisted of (i) MST and snus trademarks of $8.8
billion, which consists of Copenhagen, Skoal and other MST and snus trademarks of $4.0 billion, $3.9 billion and $0.9 billion,
respectively, from our 2009 acquisition of UST, and (ii) cigar trademarks of $2.6 billion from our 2007 acquisition of Middleton.
Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette
trademarks, e-vapor trademarks, customer relationships and supplier agreements, are amortized over a weighted-average period of
approximately 18 years. Pre-tax amortization expense for definite-lived intangible assets, which includes the impact of the NJOY
Transaction, during the years ended December 31, 2023, 2022 and 2021, was $128 million, $73 million and $72 million, respectively.
We estimate our annual amortization expense for each of the next five years to be approximately $165 million, assuming no additional
transactions occur that require the amortization of intangible assets or impacts of any measurement period adjustments related to the
NJOY Transaction.
In July 2023, we received the remaining payment of approximately $1.8 billion (including interest) from Philip Morris International Inc.
(“PMI”) as part of the 2022 agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect
to the IQOS System in the United States (“Remaining PMI Payment”). In 2022, we received $1.0 billion from PMI upon entering into
the agreement. For the years ended December 31, 2023 and 2022, we recorded disposition-related interest income for the Remaining
PMI Payment of $54 million and $21 million, respectively, in our consolidated statements of earnings. At December 31, 2023, our
consolidated balance sheet included a pre-tax $2.7 billion deferred gain, which we expect to recognize in earnings when we relinquish
our rights to the IQOS System effective April 30, 2024.
The changes in goodwill and net carrying amount of intangible assets were as follows:
(in millions)
Balance at January 1
Changes due to:
Acquisitions (1)
Amortization
2023
2022
Goodwill
Other Intangible
Assets, net
Goodwill
Other Intangible
Assets, net
$
5,177 $
12,384 $
5,177 $
12,306
1,614
—
1,430
(128)
—
—
151
(73)
Balance at December 31
(1) Substantially all of the 2023 amounts are attributable to the NJOY Transaction. For additional information regarding the NJOY Transaction, see
Note 3. Acquisition of NJOY. The 2022 amounts are attributable to acquisitions of certain intellectual property related to other tobacco products,
which included a $50 million non-cash contribution made by JTIUH to Horizon.
13,686 $
6,791 $
5,177 $
$
12,384
During 2023, 2022 and 2021, our annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment
charges. At December 31, 2023 and 2022, there were no accumulated impairment losses related to goodwill. Based on our annual
impairment analysis performed as of October 1, 2023, the estimated fair value of the Skoal trademark within the MST and snus products
reporting unit, which was determined using a discounted cash flow model, exceeded its carrying value of $3.9 billion as of December 31,
2023 by approximately 6% ($0.2 billion). A hypothetical 1% increase to the discount rate used would have resulted in an impairment
charge to the Skoal intangible asset of approximately $150 million during 2023.
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64
Note 7. Investments in Equity Securities
The carrying amount of our current and former investments consisted of the following at December 31:
(in millions)
ABI
Cronos
JUUL
Total
2023
2022
$
$
9,676 $
335
—
10,011 $
(Income) losses from our current and former investments in equity securities consisted of the following:
(in millions)
ABI (1)
Cronos (1)
(Income) losses from investments under equity method of
accounting
JUUL
(Income) losses from investments in equity securities
For the Years Ended December 31,
2022
2021
2023
$
$
$
(539)
46
(493)
250 (2)
(243)
$
1,973
213
2,186
1,455 (3)
3,641
$
$
8,975
375
250
9,600
5,564
415
5,979
—
5,979
(1) Includes our share of amounts recorded by our investees and additional adjustments, if required, related to (i) the conversion from international
financial reporting standards to GAAP and (ii) adjustments to our investments required under the equity method of accounting.
(2) Represents loss as a result of the disposition of our JUUL equity securities discussed below.
(3) Represents the estimated change in fair value. Prior to the disposition of our JUUL equity securities on March 3, 2023, we accounted for our former
investment in JUUL as an investment in an equity security measured at fair value.
Investees’ summarized financial data for our equity method investments was as follows:
(in millions)
Net revenues
Gross profit
Earnings (losses) from
continuing operations
Net earnings (losses)
Net earnings (losses) attributable
to equity investments
$
$
$
$
$
(in millions)
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Noncontrolling interests
2023 (1)
For Altria’s Year Ended December 31,
2022 (1)
2021 (1)
ABI
Other
Investments
ABI
Other
Investments
ABI
Other
Investments
59,841 $
32,371 $
7,956 $
7,956 $
87 $
9 $
57,267 $
31,588 $
947 $
525 $
52,864 $
30,653 $
(105) $
(108) $
7,879 $
7,879 $
(521) $
(521) $
7,434 $
7,434 $
6,284 $
(108) $
5,838 $
(520) $
5,780 $
1,313
757
(800)
(800)
(798)
At September 30,
2023 (1)
2022 (1)
ABI
Other Investments
ABI
Other Investments
$
$
$
$
$
22,835 $
188,003 $
35,407 $
91,791 $
11,231 $
918 $
232 $
31 $
3 $
(3) $
24,164 $
182,087 $
32,649 $
96,497 $
11,778 $
963
274
38
8
(3)
(1) Reflects a one-quarter lag. Other Investments reflect summarized financial data of Cronos, as well as JUUL’s financial data for the periods during
which we accounted for our former investment in JUUL as an equity method investment under the fair value option.
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65
Investment in ABI
At December 31, 2023, we had an approximate 10% ownership interest in ABI, consisting of 185 million restricted shares of ABI
(“Restricted Shares”) and 12 million ordinary shares of ABI. Our Restricted Shares:
are unlisted and not admitted to trading on any stock exchange;
are convertible by us into ordinary shares of ABI on a one-for-one basis;
rank equally with ordinary shares of ABI with regards to dividends and voting rights; and
▪
▪
▪
▪ have director nomination rights with respect to ABI.
We have not elected to convert our Restricted Shares into ordinary shares of ABI.
We account for our investment in ABI under the equity method of accounting because we have the ability to exercise significant
influence over the operating and financial policies of ABI, including having active representation on ABI’s board of directors and certain
ABI board committees. Through this representation, we participate in ABI’s policy making processes.
We report our share of ABI’s results using a one-quarter lag because ABI’s results are not available in time for us to record them in the
concurrent period.
The fair value of our investment in ABI is based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was
classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar
assets for the Restricted Shares and was classified in Level 2 of the fair value hierarchy. We can convert our Restricted Shares to
ordinary shares at our discretion. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.
The fair value of our investment in ABI at December 31, 2023 and 2022 was $12.7 billion and $11.9 billion, respectively, which
exceeded its carrying value of $9.7 billion and $9.0 billion by approximately 32% and 33%, respectively.
At September 30, 2022 and 2021, the fair value of our investment in ABI had declined below its carrying value by $2.5 billion and $6.2
billion or approximately 22% and 35%, respectively. We determined the declines in fair value to be other than temporary and recorded
non-cash, pre-tax impairment charges of $2.5 billion and $6.2 billion during the third quarter of 2022 and 2021, respectively, which were
recorded to (income) losses from investments in equity securities in our consolidated statements of earnings for the years ended
December 31, 2022 and 2021, respectively.
At December 31, 2023, the carrying value of our investment in ABI exceeded its share of ABI’s net assets attributable to equity holders
of ABI by approximately $2.5 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible
assets (consisting primarily of trademarks).
Investment in Cronos
At December 31, 2023, we had a 41.1% ownership interest in Cronos, consisting of 156.6 million shares, which we account for under the
equity method of accounting. We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available
in time for us to record them in the concurrent period.
The fair value of our investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was
classified in Level 1 of the fair value hierarchy.
At December 31, 2023, the fair value of our investment in Cronos was less than its carrying value by $8 million or approximately 2%.
Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition
(including its cash position) and near-term prospects, and our intent and ability to hold our investment in Cronos until recovery, we
concluded that the decline in fair value of our investment in Cronos below its carrying value is temporary and, therefore, no impairment
was recorded.
At December 31, 2022, the fair value of our investment in Cronos exceeded its carrying value by $22 million or approximately 6%.
At June 30, 2022 and December 31, 2021, the fair value of our investment in Cronos was less than its carrying value by approximately
20% and 25%, respectively. We determined the declines in fair value to be other than temporary and recorded non-cash, pre-tax
impairment charges of $107 million and $205 million in the second quarter of 2022 and the fourth quarter of 2021, respectively, which
were recorded to (income) losses from investments in equity securities in our consolidated statements of earnings for years ended
December 31, 2022 and 2021, respectively.
As part of our investment in Cronos, prior to December 15, 2022, we also owned a warrant that provided us the ability to purchase an
additional approximate 10% of common shares of Cronos at a per share exercise price of Canadian dollar (“CAD”) $19.00, which would
have expired on March 8, 2023. On December 15, 2022, we irrevocably abandoned the Cronos warrant, and we no longer owned the
warrant as of December 31, 2022. For the years ended December 31, 2022 and 2021, we recorded $15 million and $148 million,
respectively, representing non-cash, pre-tax unrealized losses on Cronos-related financial instruments, substantially all of which related
to changes in the fair value of the Cronos warrant.
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66
Former Investment in JUUL
In December 2018, we made an investment in JUUL for $12.8 billion and received a 35% economic interest in JUUL through non-
voting shares, which we converted at our election into voting shares in November 2020, and a security convertible into additional non-
voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities. At the time of the investment,
we agreed to non-competition obligations generally requiring that we participate in the e-vapor business only through JUUL. In
September 2022, we exercised our option to be released from our JUUL non-competition obligations, resulting in (i) the permanent
termination of our non-competition obligations to JUUL, (ii) the loss of our JUUL board designation rights (other than the right to
designate one independent director so long as our ownership continued to be at least 10%), our preemptive rights, our consent rights and
certain other rights with respect to our investment in JUUL and (iii) the conversion of our JUUL shares to single vote common stock,
significantly reducing our voting power.
As discussed in Note 1. Background and Basis of Presentation, in March 2023 we entered into the Stock Transfer Agreement with
JUUL under which we transferred to JUUL all of our beneficially owned JUUL equity securities and, in exchange, received the JUUL
Heated Tobacco IP. In addition, all other agreements between us and JUUL were terminated or we were removed as parties thereto,
other than certain litigation-related agreements and a license agreement relating to our non-trademark licensable intellectual property
rights in the e-vapor field, which remain in force solely with respect to our e-vapor intellectual property as of or prior to March 3, 2023.
Following the conversion of certain non-voting shares of JUUL into voting shares in the fourth quarter of 2020, we elected to account
for our investment in JUUL under the fair value option. As a result of our loss of certain rights due to our exercise of our option to be
released from our JUUL non-competition obligations in the third quarter of 2022, we determined that we no longer had the ability to
exercise significant influence over the operating and financial policies of JUUL. Therefore, we were no longer able to account for our
investment in JUUL as an equity method investment. Beginning with the period ended September 30, 2022 and until March 3, 2023,
when we transferred to JUUL all of our beneficially owned JUUL equity securities, we accounted for our former investment in JUUL as
an investment in an equity security. Our consolidated statements of earnings include any changes in the estimated fair value of our
former investment, which were calculated quarterly.
The following table provides a reconciliation of the beginning and ending balance of our former investment in JUUL, which was
classified in Level 3 of the fair value hierarchy prior to the disposition of our JUUL equity securities:
(in millions)
Balance at December 31, 2021
Unrealized gains (losses) included in (income) losses from investments in equity securities
Balance at December 31, 2022
Non-cash, pre-tax (loss) on disposition included in (income) losses from investments in equity securities
Balance at December 31, 2023
2023 Financial Activity
Investment Balance
$
$
1,705
(1,455)
250
(250)
—
▪
For the year ended December 31, 2023, we recorded a non-cash, pre-tax loss on the disposition of our JUUL equity securities of
$250 million as a result of transferring to JUUL all of our beneficially owned JUUL equity securities pursuant to the Stock
Transfer Agreement. Additionally, we considered specific facts and circumstances around the nature of the JUUL Heated
Tobacco IP and determined that the fair value of such intellectual property was not material to our consolidated financial
statements as of the date of the transaction. As a result, we did not record an asset associated with this intellectual property on
our consolidated balance sheet. The primary drivers of this conclusion were (i) our rights to the JUUL Heated Tobacco IP
being non-exclusive, (ii) there being no product or technology transferred to us associated with the JUUL Heated Tobacco IP
and (iii) there being no connection between the JUUL Heated Tobacco IP and our current product development plans.
2022 Financial Activity
▪
For the year ended December 31, 2022, we recorded non-cash, pre-tax unrealized losses of $1,455 million as a result of changes
in the estimated fair value of our former investment in JUUL. The decrease in the estimated fair value was primarily driven by
(i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products that were marketed in the United
States, which had received marketing denial orders (“MDOs”) in June 2022 and were under additional administrative review at
the time of our subsequent quarterly valuations, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund
projected cash needs, which could have resulted in JUUL seeking protection under bankruptcy or other insolvency laws, (iii)
projections of higher operating expenses resulting in lower long-term operating margins, (iv) projections of lower JUUL
revenues in the United States over time due to lower JUUL volume assumptions and (v) an increase in the discount rate due to
changes in market factors, partially offset by the effect of passage of time on the projected cash flows.
We used an income approach to estimate the fair value of our former investment in JUUL. The income approach reflected the
discounting of future cash flows for the U.S. and international markets at a rate of return that incorporated the risk-free rate for the use of
those funds, the expected rate of inflation and the risks associated with realizing future cash flows.
67
67
In determining the estimated fair value of our former investment in JUUL, in 2022 and 2021, we made certain judgments, estimates and
assumptions, the most significant of which were likelihood of certain potential regulatory and liquidity outcomes, sales volume,
operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation were classified in Level 3 of
the fair value hierarchy. Additionally, in determining these significant assumptions, we made judgments regarding the (i) likelihood of
certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA would ultimately authorize JUUL’s
products, which had received the MDOs in June 2022 and were under additional administrative review at the time of our subsequent
quarterly valuations; (ii) likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, the absence of which could
have resulted in JUUL seeking protection under bankruptcy or other insolvency laws; (iii) risk created by the number and types of legal
cases pending against JUUL; (iv) expectations for the future state of the e-vapor category, including competitive dynamics; and (v)
timing of international expansion plans. Due to these uncertainties, our future cash flow projections of JUUL were based on a range of
scenarios that considered certain potential regulatory, liquidity and market outcomes.
Note 8. Financial Instruments
We enter into derivative financial instruments to mitigate the potential impact of certain market risks, including foreign currency
exchange rate risk. We use various types of derivative financial instruments, including forward contracts, options and swaps. We do not
enter into or hold derivative financial instruments for trading or speculative purposes.
Our investment in ABI, whose functional currency is the Euro, exposes us to foreign currency exchange risk on the carrying value of our
investment. To manage this risk, we may designate certain foreign exchange contracts, including cross-currency swap contracts and
forward contracts (collectively, “foreign currency contracts”), and Euro denominated unsecured long-term notes (“foreign currency
denominated debt”) as net investment hedges of our investment in ABI.
At December 31, 2023 and 2022, we had no outstanding foreign currency contracts. When we have foreign currency contracts in effect,
counterparties are domestic and international financial institutions. Under these contracts, we are exposed to potential losses in the event
of non-performance by these counterparties. We manage our credit risk by entering into transactions with counterparties that have
investment grade credit ratings, limiting the amount of exposure we have with each counterparty and monitoring the financial condition
of each counterparty. The counterparty agreements contain provisions that require us to maintain an investment grade credit rating. In
the event our credit rating falls below investment grade, counterparties to our foreign currency contracts can require us to post collateral.
The aggregate carrying value and fair value of our total long-term debt were as follows at December 31:
(in millions)
Carrying value
Fair value
Foreign currency denominated debt included in long-term debt:
Carrying value
Fair value
2023
2022
$
26,233 $
24,373
3,303
3,125
26,680
22,928
4,540
4,165
Our estimate of the fair value of our total long-term debt is based on observable market information derived from a third-party pricing
source and is classified in Level 2 of the fair value hierarchy.
Net Investment Hedging
The pre-tax effects of our net investment hedges on accumulated other comprehensive losses were as follows:
(in millions)
Foreign currency contracts
Foreign currency denominated debt
Total
(Gain) Loss Recognized in Accumulated Other
Comprehensive Losses
For the Years Ended December 31,
2023
2022
2021
$
$
— $
108
108 $
— $
(281)
(281) $
(16)
(359)
(375)
In addition, we recognized a pre-tax (gain) of our net investment hedges of $(7) million on the foreign currency contracts for the year
ended December 31, 2021 in our consolidated statement of earnings.
We recognized changes in the fair value of the foreign currency contracts and in the carrying value of the foreign currency denominated
debt due to changes in the Euro to U.S. dollar exchange rate in accumulated other comprehensive losses related to ABI. We recognized
gains on the foreign currency contracts arising from components excluded from effectiveness testing in interest and other debt expense,
net in our consolidated statements of earnings based on an amortization approach.
68
68
Note 9. Short-Term Borrowings and Borrowing Arrangements
At December 31, 2023 and 2022, we had no short-term borrowings.
In June 2023, we entered into a $2.0 billion term loan facility and borrowed the full amount available to fund a portion of the cash
payments at the closing of the NJOY Transaction. In July 2023, upon receipt of the Remaining PMI Payment, we repaid the term loan
facility in full. For additional information regarding the NJOY Transaction and the Remaining PMI Payment, see Note 3. Acquisition of
NJOY and Note 6. Goodwill and Other Intangible Assets, net, respectively.
In October 2023, we entered into a new senior unsecured 5-year revolving credit agreement for borrowings of up to an aggregate
principal amount of $3.0 billion (“Credit Agreement”) and terminated our prior credit agreement, which was scheduled to expire on
August 1, 2025 (“Prior Credit Agreement”). Our Credit Agreement expires on October 24, 2028 and includes an option, subject to
certain conditions, for us to extend our Credit Agreement for two additional one-year periods. We intend to use any borrowings under
our Credit Agreement for general corporate purposes.
At December 31, 2023 and 2022, we had availability under our Credit Agreement and our Prior Credit Agreement, as applicable, for
borrowings of up to an aggregate principal amount of $3.0 billion.
Pricing for interest and fees under our Credit Agreement may be modified in the event of a change in the rating of our long-term senior
unsecured debt. We expect interest rates on borrowings under our Credit Agreement to be based on the Term Secured Overnight
Financing Rate plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors
Service, Inc. (“Moody’s”) and Standard & Poor’s Financial Services LLC (“S&P”). The applicable percentage for borrowings under our
Credit Agreement at December 31, 2023 was 1.0% based on our long-term senior unsecured debt ratings on that date. Our Credit
Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.
Our Credit Agreement includes various covenants, one of which requires us to maintain a ratio of consolidated earnings before interest,
taxes, depreciation and amortization (“EBITDA”) to Consolidated Interest Expense of not less than 4.0 to 1.0, calculated as of the end of
the applicable quarter on a rolling four quarters basis. At December 31, 2023, we were in compliance with our covenants in our Credit
Agreement. The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in our Credit Agreement, include
certain adjustments.
PM USA guarantees any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.
For further discussion of PM USA’s guarantees, see Note 10. Long-Term Debt.
Note 10. Long-Term Debt
Our long-term debt consisted of the following at December 31:
(in millions)
USD notes, 2.350% to 10.200%, interest payable semi-annually, due through 2061 (1)
USD debenture, 7.75%, interest payable semi-annually, due 2027
Euro notes, 1.700% to 3.125%, interest payable annually, due through 2031 (2)
Less current portion of long-term debt
(1) Weighted-average coupon interest rate of 4.5% and 4.4% at December 31, 2023 and 2022, respectively.
(2) Weighted-average coupon interest rate of 2.5% and 2.0% at December 31, 2023 and 2022, respectively.
2023
2022
$
22,888 $
22,098
42
3,303
26,233
1,121
$
25,112 $
42
4,540
26,680
1,556
25,124
69
69
At December 31, 2023, our outstanding long-term debt consisted of the following:
(in millions)
Type
USD notes
USD notes
USD notes
Euro notes
USD notes
USD notes
USD debenture
Euro notes
USD notes
USD notes
USD notes
Euro notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
USD notes
Face Value
$776
$345
$750
€750
$1,069
$500
$42
€1,000
$500
$1,906
$750
€1,250
$1,750
$500
$177
$208
$2,000
$1,500
$900
$650
$1,800
$1,500
$2,500
$500
$1,250
$271
$1,000
Interest Rate
4.000%
3.800%
2.350%
1.700%
4.400%
2.625%
7.750%
2.200%
6.200%
4.800%
3.400%
3.125%
2.450%
6.875%
9.950%
10.200%
5.800%
3.400%
4.250%
4.500%
5.375%
3.875%
5.950%
4.450%
3.700%
6.200%
4.000%
At December 31, 2023, aggregate maturities of our long-term debt were as follows:
(in millions)
2024
2025
2026
2027
2028
Thereafter
Less: debt issuance costs
debt discounts
Issuance
October 2013
February 2019
May 2020
February 2019
February 2019
September 2016
January 1997
February 2019
November 2023
February 2019
May 2020
February 2019
February 2021
November 2023
November 2008
February 2009
February 2019
February 2021
August 2012
May 2013
October 2013
Maturity
January 2024
February 2024
May 2025
June 2025
February 2026
September 2026
January 2027
June 2027
November 2028
February 2029
May 2030
June 2031
February 2032
November 2033
November 2038
February 2039
February 2039
February 2041
August 2042
May 2043
January 2044
September 2016
September 2046
February 2019
February 2049
May 2020
February 2021
February 2019
February 2021
May 2050
February 2051
February 2059
February 2061
Aggregate
Maturities
$
1,121
1,578
1,569
1,146
500
20,542
26,456
142
81
$
26,233
At December 31, 2023 and 2022, accrued interest on long-term debt of $410 million and $411 million, respectively, was included in
other accrued liabilities on our consolidated balance sheets.
70
70
For a discussion of the fair value of our long-term debt and the designation of our Euro denominated senior unsecured notes as a net
investment hedge of our investment in ABI, see Note 8. Financial Instruments.
▪
Long-Term Debt Activity: In November 2023, we issued USD denominated senior unsecured notes in the aggregate principal
amount of $1.0 billion. The net proceeds from the notes are being used for general corporate purposes. The notes contain the following
terms:
▪
▪
$0.5 billion at 6.200%, due 2028, interest payable semiannually beginning May 1, 2024; and
$0.5 billion at 6.875%, due 2033, interest payable semiannually beginning May 1, 2024.
In February and May 2023, respectively, we repaid in full the aggregate principal amounts at maturity of the following:
▪
▪
$1.3 billion (€1.25 billion) of our senior unsecured Euro denominated notes at 1.000%; and
$218 million of our senior unsecured notes at 2.950%.
In January 2024, we repaid in full our 4.000% senior unsecured notes in the aggregate principal amount of $776 million at maturity.
All of our notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior
unsecured indebtedness. Following the occurrence of both (i) a change of control of Altria and (ii) the notes ceasing to be rated
investment grade by each of Moody’s, S&P and Fitch Ratings Inc., we will be required to make an offer to purchase the notes at a price
equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest to the date of repurchase as and to the
extent set forth in the terms of the notes.
2021 Debt Tender Offers and Redemption: During the first quarter of 2021, we (i) completed debt tender offers to purchase
▪
for cash certain of our senior unsecured notes in an aggregate principal amount of $4,042 million and (ii) redeemed all of our
outstanding 3.490% senior unsecured notes due to mature in 2022 in the aggregate principal amount of $1.0 billion. As a result of the
debt tender offers and redemption, during the first quarter of 2021, we recorded pre-tax losses on early extinguishment of debt of $649
million, which included premiums and fees of $623 million and the write-off of unamortized debt discounts and debt issuance costs of
$26 million.
PM USA Guarantees: PM USA (“Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc. (“Parent”), has
▪
guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts
outstanding under its commercial paper program (“Guarantees”). Pursuant to the Guarantees, the Guarantor fully and unconditionally
guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments
(“Obligations”), subject to release under certain customary circumstances as noted below.
The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of the Obligations. The liability of the Guarantor under the Guarantees is absolute and unconditional irrespective of: any lack
of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time,
manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any
consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other
circumstance that might otherwise constitute a defense available to, or a discharge of, the Parent or the Guarantor.
The Parent is a holding company; therefore, its access to the operating cash flows of its subsidiaries consists of cash received from the
payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. Neither the Guarantor nor
other subsidiaries of the Parent that are not guarantors of the Obligations are limited by contractual obligations on their ability to pay
cash dividends or make other distributions with respect to their equity interests.
71
71
Note 11. Capital Stock
At December 31, 2023, we had 12 billion shares of authorized common stock; issued, repurchased and outstanding shares of common
stock consisted of the following:
Balances, December 31, 2020
Stock award activity
Repurchases of common stock
Balances, December 31, 2021
Stock award activity
Repurchases of common stock
Balances, December 31, 2022
Stock award activity
Repurchases of common stock
Balances, December 31, 2023
Shares Issued
Shares
Repurchased
2,805,961,317
—
—
2,805,961,317
—
—
2,805,961,317
—
—
2,805,961,317
(947,542,152)
412,569
(35,656,116)
(982,785,699)
514,816
(38,156,312)
(1,020,427,195)
676,495
(22,748,842)
(1,042,499,542)
Shares Outstanding
1,858,419,165
412,569
(35,656,116)
1,823,175,618
514,816
(38,156,312)
1,785,534,122
676,495
(22,748,842)
1,763,461,775
At December 31, 2023, we had 25,422,465 shares of common stock reserved for stock-based awards under our stock plans.
At December 31, 2023, we had 10 million authorized shares of serial preferred stock, $1.00 par value; no shares of serial preferred stock
have been issued.
▪
Dividends: In the third quarter of 2023, our Board of Directors (“Board of Directors” or “Board”) approved a 4.3% increase in
the quarterly dividend rate to $0.98 per share of our common stock versus the previous rate of $0.94 per share. The current annualized
dividend rate is $3.92 per share. Future dividend payments remain subject to the discretion of our Board.
Share Repurchases: In January 2021, our Board of Directors authorized a $2.0 billion share repurchase program that it
▪
expanded to $3.5 billion in October 2021 (as expanded, “January 2021 share repurchase program”). We completed the January 2021
share repurchase program in December 2022.
In January 2023, our Board of Directors authorized a $1.0 billion share repurchase program (“January 2023 share repurchase program”).
We completed the January 2023 share repurchase program in December 2023.
In January 2024, our Board of Directors authorized a new $1.0 billion share repurchase program, which we expect to complete by
December 31, 2024. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and
the program remains subject to the discretion of our Board.
Our total share repurchase activity was as follows for the years ending December 31:
(in millions, except per share data)
Total number of shares repurchased
Aggregate cost of shares repurchased
Average price per share of shares repurchased
Note 12. Stock Plans
January 2023
Share Repurchase
Program
2023
January 2021 Share Repurchase Program
2021
2022
Total
$
$
22.7
1,000 $
43.96 $
38.1
1,825 $
47.83 $
35.7
1,675 $
46.97 $
73.8
3,500
47.42
In 2020, our Board of Directors adopted, and shareholders approved, the Altria Group, Inc. 2020 Performance Incentive Plan (“2020
Plan”) under which we may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance
stock units (“PSUs”) and other stock-based awards, as well as cash-based annual and long-term incentive awards to our employees. Any
awards granted under the 2020 Plan may be in the form of performance-based awards, including PSUs subject to the achievement or
satisfaction of performance goals and performance cycles. We may issue up to 25 million shares of common stock under the 2020 Plan.
In addition, under the 2015 Stock Compensation Plan for Non-Employee Directors (“Directors Plan”), we may grant up to one million
shares of common stock to members of the Board of Directors who are not employees of Altria.
At December 31, 2023, we had 20,432,234 and 589,927 shares available to be granted under the 2020 Plan and the Directors Plan,
respectively.
72
72
RSUs: During the vesting period, RSUs include nonforfeitable rights to dividend equivalents and may not be sold, assigned,
▪
pledged or otherwise encumbered. RSUs are subject to forfeiture if certain employment conditions are not met. We estimate the
number of awards expected to be forfeited and adjust this estimate when subsequent information indicates that the actual number of
forfeitures is likely to differ from previous estimates. RSUs generally vest three years after the grant date.
We amortize to expense ratably over the restriction period, which is generally three years, the fair value of the RSUs at the date of grant,
net of estimated forfeitures. We recorded pre-tax compensation expense related to RSUs for the years ended December 31, 2023, 2022
and 2021 of $47 million, $41 million and $34 million, respectively. We recorded a deferred tax benefit related to this compensation
expense of $12 million, $10 million and $9 million for the years ended December 31, 2023, 2022 and 2021, respectively. The
unamortized compensation expense related to RSUs was $77 million at December 31, 2023, which we expect to be recognized over a
weighted-average period of approximately two years.
RSU activity was as follows:
Balance at December 31, 2022
Granted
Vested
Forfeited
Balance at December 31, 2023
Number of Shares
Weighted-Average
Grant Date Fair
Value Per Share
3,257,795 $
1,208,405 $
(886,237) $
(107,162) $
3,472,801 $
46.90
46.38
46.40
47.04
46.84
The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2023, 2022 and 2021 was $56 million,
$59 million and $48 million, respectively, or $46.38, $49.22 and $45.22 per RSU, respectively. The total vesting date fair value of
RSUs that vested during the years ended December 31, 2023, 2022 and 2021 was $40 million, $29 million and $19 million, respectively.
PSUs: We granted an aggregate of 255,601, 215,205 and 229,494 of PSUs during 2023, 2022 and 2021, respectively. The
▪
payout of the PSUs is based on the extent to which we achieve certain performance measures over the three-year performance period.
Performance measures consist of our adjusted diluted earnings per share compounded annual growth rate and a cash conversion
measure. Additionally, the payout resulting from the performance measures is then adjusted up or down by a total shareholder return
(“TSR”) performance multiplier, which depends on our relative TSR to a predetermined peer group. PSUs are subject to forfeiture if
certain employment conditions are not met. At December 31, 2023, we had 713,467 PSUs outstanding, with a weighted-average grant
date fair value of $49.22 per PSU. We amortize to expense over the performance period the fair value of PSUs at the date of grant, net
of estimated forfeitures. We recorded pre-tax compensation expense related to PSUs for the years ended December 31, 2023, 2022 and
2021 of $11 million, $9 million and $6 million, respectively. The unamortized compensation expense related to PSUs was $15 million
at December 31, 2023.
Note 13. Earnings per Share
We calculated basic and diluted earnings per share (“EPS”) using the following:
(in millions)
Net earnings
Less: Distributed and undistributed earnings attributable to share-based awards
Earnings for basic and diluted EPS
For the Years Ended December 31,
2023
2022
2021
$
$
8,130 $
5,764 $
2,475
(17)
(13)
(11)
8,113 $
5,751 $
2,464
Weighted-average shares for basic and diluted EPS
1,777
1,804
1,845
Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities
and, therefore, are included in our EPS calculation pursuant to the two-class method.
73
73
Note 14. Other Comprehensive Earnings/Losses
Changes in each component of accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria were as
follows:
Benefit Plans
ABI
Currency
Translation
Adjustments
and Other
Accumulated
Other
Comprehensive
Losses
(in millions)
Balances, December 31, 2020
Other comprehensive earnings (losses) before reclassifications
Deferred income taxes
Other comprehensive earnings (losses) before
reclassifications, net of deferred income taxes
Amounts reclassified to net earnings
Deferred income taxes
Amounts reclassified to net earnings, net of
deferred income taxes
Other comprehensive earnings (losses), net of deferred
income taxes
Balances, December 31, 2021
Other comprehensive earnings (losses) before reclassifications
Deferred income taxes
Other comprehensive earnings (losses) before
reclassifications, net of deferred income taxes
Amounts reclassified to net earnings
Deferred income taxes
Amounts reclassified to net earnings, net of
deferred income taxes
Other comprehensive earnings (losses), net of deferred
income taxes
Balances, December 31, 2022
Other comprehensive earnings (losses) before reclassifications
Deferred income taxes
Other comprehensive earnings (losses) before
reclassifications, net of deferred income taxes
Amounts reclassified to net earnings
Deferred income taxes
Amounts reclassified to net earnings, net of
deferred income taxes
Other comprehensive earnings (losses), net of deferred
income taxes
$
(2,420)
$
(1,938)
$
961
(245)
716
122
(30)
92
627
(141)
486
(76)
16
(60)
808
(1,612)
(1)
426
(1,512)
145
(35)
110
88
(22)
66
275
(65)
210
(85)
18
(67)
176
(1,436)
(1)
143
(1,369)
(48)
9
(39)
(26)
8
(18)
(57)
178
(35)
143
39
(8)
31
(1)
174
$
17
25
—
25
35
(9)
26
51
68
(33)
—
(33)
(1)
—
(1)
(34)
34
(28)
9
(19)
—
—
—
(19)
Balances, December 31, 2023
$
(1) Primarily reflects our share of ABI’s currency translation adjustments and the impact of our designated net investment hedges related to our
(1,195)
(1,493)
15
$
$
$
investment in ABI. For further discussion of designated net investment hedges, see Note 8. Financial Instruments.
74
74
(4,341)
1,613
(386)
1,227
81
(23)
58
1,285
(3,056)
387
(100)
287
2
(4)
(2)
285
(2,771)
102
(17)
85
13
—
13
98
(2,673)
Pre-tax amounts by component, reclassified from accumulated other comprehensive losses to net earnings were as follows:
(in millions)
Benefit Plans: (1)
Net loss
Prior service cost (credit)
ABI (2)
Currency Translation Adjustments and Other (3)
Pre-tax amounts reclassified from accumulated other comprehensive losses to net
earnings
For the Years Ended December 31,
2021
2022
2023
$
$
8
(34)
(26)
39
—
$
127
(39)
88
(85)
(1)
163
(41)
122
(76)
35
$
13
$
2
$
81
(1) Amounts are included in net periodic benefit income, excluding service cost. For further details, see Note 17. Benefit Plans.
(2) Amounts are included in (income) losses from investments in equity securities. For further information, see Note 7. Investments in Equity Securities.
(3) 2021 amounts are included in marketing, administration and research costs and are related to the Ste. Michelle Transaction.
Note 15. Income Taxes
In August 2022, the U.S. Government enacted legislation commonly referred to as the Inflation Reduction Act that became effective
January 1, 2023. The main provisions of the Inflation Reduction Act that impact us are: (i) a 15% corporate alternative minimum tax
(“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which is recorded in equity on our consolidated statements of
stockholders’ equity (deficit).
We are considered an “applicable corporation” for purposes of Corporate AMT. We expect our regular federal income tax liability will
generally exceed our Corporate AMT liability; however, certain unique circumstances may result in our Corporate AMT liability
exceeding our regular federal income tax liability, including when tax losses are reported in a different year than book losses. For the
year ended December 31, 2023, we made estimated payments based on a Corporate AMT liability as a result of tax losses we intend to
claim related to our former investment in JUUL, as discussed below.
Earnings (losses) before income taxes and provision (benefit) for income taxes consisted of the following:
(in millions)
Earnings (losses) before income taxes:
United States
Outside United States
Total
Provision (benefit) for income taxes:
Current:
Federal
State and local
Outside United States
Deferred:
Federal
State and local
Total provision for income taxes
For the Years Ended December 31,
2023
2022
2021
$
$
$
$
10,971 $
7,628 $
(43)
(239)
10,928 $
7,389 $
2,346 $
1,968 $
681
1
3,028
(133)
(97)
603
1
2,572
(893)
(54)
(230)
2,798 $
(947)
1,625 $
4,239
(415)
3,824
1,965
542
2
2,509
(1,190)
30
(1,160)
1,349
Our U.S. subsidiaries join in the filing of a U.S. federal consolidated income tax return. The U.S. federal income tax statute of
limitations remains open for the year 2017 and forward, with years 2017 through 2020 currently under examination by the Internal
Revenue Service (“IRS”) as part of an audit conducted in the ordinary course of business. State statutes of limitations will also generally
remain open for the year 2017 and forward. Certain of our state tax returns are currently under examination by various states as part of
routine audits conducted in the ordinary course of business.
75
75
A reconciliation of the beginning and ending unrecognized tax benefits was as follows:
(in millions)
Balance at beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions due to lapse of statutes of limitations
Reductions for tax positions of prior years
Tax settlements
Balance at end of year
For the Years Ended December 31,
2022
2023
2021
$
$
69 $
1,548
—
—
(6)
(3)
1,608 $
53 $
1
16
—
—
(1)
69 $
74
—
40
(5)
(23)
(33)
53
The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2023, was $35 million,
along with $1,573 million affecting deferred taxes, a portion of which would also impact the effective tax rate due to the release of a
valuation allowance, as discussed below. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax
rate at December 31, 2022, was $44 million, along with $25 million affecting deferred taxes.
For the year ended December 31, 2023, we recognized a $6.4 billion ordinary loss for cash tax purposes with respect to a portion of our
tax basis associated with our former investment in JUUL. For financial statement purposes, we fully reserved for the tax benefit
associated with this ordinary loss by recording an unrecognized tax benefit, pending the IRS’s review of our tax position. We recorded a
tax benefit associated with the ordinary loss of $1,505 million and a reduction to our current income taxes payable. We also recorded a
$1,548 million increase in a long-term liability for unrecognized tax benefits related to this tax position, partially offset by a $43 million
deferred federal benefit for state taxes. There was no impact to our consolidated statement of earnings. In addition, the $1,548 million
increase in unrecognized tax benefits was partially offset by $428 million associated with an indirect deferred tax benefit caused by our
estimated Corporate AMT credit carryforward, resulting in a net increase of $1,120 million in other liabilities on our consolidated
balance sheet at December 31, 2023. If recognized for financial statement purposes in a future period, this unrecognized tax benefit
would impact the effective tax rate due to the release of a valuation allowance against this temporary difference.
At December 31, 2023, 2022 and 2021, the amount of accrued interest and penalties on our consolidated balance sheets was $36 million,
$18 million and $11 million, respectively. For the years ended December 31, 2023, 2022 and 2021, we recognized in our consolidated
statements of earnings $20 million, $8 million and $(4) million, respectively, of gross interest (income) expense and penalties associated
with uncertain tax positions. We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax
provision.
We are subject to income taxation in many jurisdictions. Unrecognized tax benefits reflect the differences between tax positions we
have taken or expect to take on income tax returns and the amounts recognized in our financial statements. Resolution of the related tax
positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within our control. It is
reasonably possible that within the next 12 months certain examinations will be resolved, which could result in a decrease in
unrecognized tax benefits of approximately $15 million.
76
76
A reconciliation between actual income taxes and amounts computed by applying the federal statutory rate to earnings before income
taxes was as follows:
(dollars in millions)
U.S. federal statutory rate
Increase (decrease) resulting from:
For the Years Ended December 31,
2022
2023
2021
$
$ 2,295
%
21.0 % $ 1,552
$
%
21.0 % $
$
803
State and local income taxes, net of federal tax benefit
Tax basis in foreign investments
Uncertain tax positions
Investment in ABI
Investment in JUUL
Investment in Cronos
Valuation allowance releases
Other
Effective tax rate
463
34
8
(37)
53
11
—
(29)
$ 2,798
4.2
435
0.3
11
0.1
—
(0.3)
(24)
0.5
306
0.1
30
—
(664)
(21)
(0.3)
25.6 % $ 1,625
5.9
451
0.1
25
—
(25)
(0.3)
(16)
4.1
7
0.4
128
(9.0)
(15)
(9)
(0.2)
22.0 % $ 1,349
%
21.0 %
11.8
0.7
(0.7)
(0.4)
0.2
3.3
(0.4)
(0.2)
35.3 %
The tax provision (benefit) in 2023 included state tax expense, net of federal benefit, of $463 million and tax expense of $53 million for
a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL.
The tax provision (benefit) in 2022 included tax benefits of $664 million due primarily to the release of valuation allowances related to
the anticipated ability to utilize a portion of existing capital losses. These tax benefits were partially offset by tax expense of
$306 million for a valuation allowance recorded against a deferred tax asset related to the decreases in the estimated fair value of our
former investment in JUUL and by the state tax treatment of the impairment charge on our investment in ABI.
The tax provision (benefit) in 2021 was impacted by the state tax treatment of the impairment charge on our investment in ABI. The tax
provision (benefit) in 2021 also included net tax expense of $128 million related to our investment in Cronos, including an addition to a
valuation allowance on a deferred tax asset.
The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at
December 31:
(in millions)
Deferred income tax assets:
2023
2022
Accrued postretirement and postemployment benefits
$
302 $
Settlement charges
JUUL related losses
Investment in Cronos
IQOS deferred gain
Net operating losses and tax credit carryforwards
Other
Total deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Intangible assets
Investment in ABI
Accrued pension costs
Other
Total deferred income tax liabilities
Valuation allowances
Net deferred income tax liabilities
644
2,028
397
691
217
125
4,404
(237)
(3,210)
(1,391)
(81)
—
(4,919)
(2,256)
$
(2,771) $
77
77
303
729
3,001
407
—
31
—
4,471
(233)
(2,849)
(1,226)
(70)
(115)
(4,493)
(2,800)
(2,822)
At December 31, 2023, we had estimated gross federal, state and foreign tax net operating losses (“NOLs”) of $644 million, $700
million and $38 million, respectively. The federal NOLs and a majority of the foreign NOLs have indefinite carryforward periods. If
not used, a majority of the state NOLs will expire in 2039 through 2043.
A reconciliation of the beginning and ending valuation allowances was as follows:
(in millions)
Balance at beginning of year
Additions to valuation allowance charged to income tax expense
Reductions to valuation allowance credited to income tax benefit
Foreign currency translation
Additions to valuation allowance due to NJOY Transaction (no impact to
earnings)
Reductions to valuation allowance offset to deferred tax asset (no impact to
earnings)
Balance at end of year
$
$
For the Years Ended December 31,
2022
2021
2023
2,800 $
114
(6)
(1)
3,097 $
429
(730)
4
12
—
(663)
2,256 $
—
2,800 $
2,817
401
(118)
(3)
—
—
3,097
We determine deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance
when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of
deferred tax assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the
character of the assets and the possible sources of taxable income of the appropriate character within the available carryback and
carryforward periods available under the tax law. As has occurred in prior periods, there is a potential that sufficient positive evidence
may be available in future periods to cause us to reduce or eliminate the valuation allowance on certain deferred tax assets. That change
to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax
expense in the period the release is recorded.
The additions to valuation allowances during 2023 were primarily due to deferred tax assets recorded in connection with our former
investment in JUUL. The reductions to valuation allowances during 2023 were primarily due to the reduction of a deferred tax asset for
the portion of our JUUL capital losses that is now part of our tax basis in the shares of a foreign subsidiary. This outside basis difference
of the foreign subsidiary is not recognized as a deferred tax asset since we do not expect the temporary difference to reverse in the
foreseeable future. The cumulative valuation allowance at December 31, 2023 was primarily attributable to deferred tax assets recorded
in connection with our tax basis in the shares of a domestic subsidiary ($1,808 million) and our investment in Cronos ($397 million).
The additions to valuation allowances during 2022 were primarily due to deferred tax assets recorded in connection with decreases in the
estimated fair value of our former investment in JUUL. The reductions to valuation allowances during 2022 were primarily due to the
anticipated ability to utilize a portion of existing losses related to our former investment in JUUL and the abandonment of our Cronos
warrant. The cumulative valuation allowance at December 31, 2022 was primarily attributable to deferred tax assets recorded in
connection with our former investment in JUUL ($2,394 million) and our investment in Cronos ($379 million).
The changes in valuation allowances during 2021 were primarily due to deferred tax assets recorded in connection with our investment
in Cronos. The cumulative valuation allowance at December 31, 2021 was primarily attributable to deferred tax assets recorded in
connection with our former investment in JUUL ($2,652 million) and our investment in Cronos ($407 million).
For a discussion regarding our former investment in JUUL, the impairment of our investment in ABI and our investment in Cronos, see
Note 7. Investments in Equity Securities.
Note 16. Segment Reporting
At December 31, 2023 our reportable segments were (i) smokeable products, consisting of combustible cigarettes manufactured and sold
by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; and (ii) oral tobacco products,
consisting of MST and snus products manufactured and sold by USSTC, and oral nicotine pouches manufactured and sold by Helix.
Our all other category included (i) the financial results of NJOY (beginning June 1, 2023); (ii) Horizon; (iii) Helix ROW; (iv) our former
financial services business, which completed the wind-down of its portfolio of finance assets in 2022; and (v) the IQOS System heated
tobacco business.
Prior to the sale of our wine business on October 1, 2021, wine produced and/or sold by Ste. Michelle was a reportable segment. For
further discussion, see Note 1. Background and Basis of Presentation.
78
78
Our chief operating decision maker (“CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and
allocate resources to, our segments. OCI for our segments is defined as operating income before general corporate expenses and
amortization of intangibles. Interest and other debt expense, net, along with net periodic benefit income, excluding service cost, and
provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since
they are excluded from the measure of segment profitability reviewed by our CODM. We do not disclose information about total assets
by segment because such information is not reported to or used by our CODM. Substantially all of our long-lived assets were located in
the United States at December 31, 2023. Segment goodwill and other intangible assets, net, are disclosed in Note 6. Goodwill and Other
Intangible Assets, net. The accounting policies of the segments were the same at December 31, 2023 as those described in Note 2.
Summary of Significant Accounting Policies.
Segment data were as follows:
(in millions)
Net revenues:
Smokeable products
Oral tobacco products
Wine
All other
Net revenues
Earnings before income taxes:
OCI:
Smokeable products
Oral tobacco products
Wine
All other
Amortization of intangibles
General corporate expenses
Operating income
Interest and other debt expense, net
Loss on early extinguishment of debt
Net periodic benefit income, excluding service cost
(Income) losses from investments in equity securities
Loss on Cronos-related financial instruments
For the Years Ended December 31,
2022
2021
2023
$
$
21,756
2,667
—
60
24,483
$
$
22,476
2,580
—
40
25,096
$
$
22,866
2,608
494
45
26,013
$
10,670
$
10,688
$
10,394
1,722
—
(74)
(128)
(643)
11,547
989
—
(127)
(243)
—
1,632
—
(36)
(73)
(292)
11,919
1,058
—
(184)
3,641
15
1,659
21
(97)
(72)
(345)
11,560
1,162
649
(202)
5,979
148
3,824
Earnings before income taxes
$
10,928
$
7,389
$
The smokeable products segment included net revenues of $20,665 million, $21,457 million and $21,877 million for the years ended
December 31, 2023, 2022 and 2021, respectively, related to cigarettes and net revenues of $1,091 million, $1,019 million and $989
million for the years ended December 31, 2023, 2022 and 2021, respectively, related to cigars.
Substantially all of our net revenues for the years ended December 31, 2023, 2022 and 2021 were from sales generated in the United
States. PM USA, USSTC, Helix, Middleton and NJOY’s customer, Performance Food Group Company, accounted for approximately
25%, 24% and 23% of our consolidated net revenues for the years ended December 31, 2023, 2022 and 2021, respectively. In addition,
McLane Company, Inc., accounted for approximately 23% of our consolidated net revenues for the years ended December 31, 2023,
2022 and 2021. Substantially all of these net revenues were reported in the smokeable products and oral tobacco products segments. No
other customer accounted for more than 10% of our consolidated net revenues for the years ended December 31, 2023, 2022 and 2021.
79
79
Details of our depreciation expense and capital expenditures were as follows:
(in millions)
Depreciation expense:
Smokeable products
Oral tobacco products
Wine
General corporate and other
Total depreciation expense
Capital expenditures:
Smokeable products
Oral tobacco products
Wine
General corporate and other
Total capital expenditures
For the Years Ended December 31,
2022
2021
2023
$
$
$
$
73
37
—
34
144
77
59
—
60
196
$
$
$
$
87
33
—
33
153
68
90
—
47
205
$
$
$
$
80
34
27
31
172
48
43
12
66
169
The comparability of OCI for our reportable segments was affected by the following:
▪
follows:
Non-Participating Manufacturer (“NPM”) Adjustment Items: We recorded pre-tax income for NPM adjustment items as
(in millions)
Smokeable products segment
Interest and other debt expense, net
Total
For the Years Ended December 31,
2023
2022
2021
$
$
$
(29)
(21)
(50)
$
(63)
(5)
(68)
$
$
(53)
(23)
(76)
We recorded the amounts in the table shown above for the smokeable products segment as reductions to cost of sales in our consolidated
statements of earnings, which resulted in increased OCI in our smokeable products segment. NPM adjustment items result from the
resolutions of certain disputes with states and territories related to the NPM adjustment provision under the Master Settlement
Agreement (“NPM Adjustment Items”). For additional information, see Health Care Cost Recovery Litigation in Note 19.
Contingencies.
▪
certain other litigation items as follows:
Tobacco and Health and Certain Other Litigation Items: We recorded pre-tax charges related to tobacco and health and
(in millions)
Smokeable products segment
General corporate expenses
Interest and other debt expense, net
Total
For the Years Ended December 31,
2023
2022
2021
$
$
69 $
101 $
350
11
27
3
430 $
131 $
83
90
9
182
We recorded the amounts shown in the table above for the smokeable products segment and general corporate expenses in marketing,
administration and research costs in our consolidated statements of earnings. For further discussion, see Note 19. Contingencies.
Ste. Michelle Transaction: We recorded pre-tax disposition-related costs of $51 million for the year ended December 31, 2021
▪
in our former wine segment, which consisted of a pre-tax charge of $41 million to record the assets and liabilities associated with the
Ste. Michelle Transaction at their fair value less costs to sell and $10 million of other disposition-related costs. We included these costs
in marketing, administration and research costs in our consolidated statements of earnings.
Acquisition-Related Costs: We recorded pre-tax acquisition-related costs of $37 million for the year ended December 31,
▪
2021 in our oral tobacco products segment primarily for the settlement of an arbitration related to the 2019 on! transaction. We included
these costs in marketing, administration and research costs in our consolidated statements of earnings.
80
80
Note 17. Benefit Plans
Our subsidiaries sponsor noncontributory defined benefit pension plans covering certain employees of Altria and our subsidiaries.
Employees hired on or after a date specific to their employee group are not eligible to participate in these noncontributory defined
benefit pension plans but are instead eligible to participate in a defined contribution plan with enhanced benefits. We also provide
postretirement health care and other benefits to certain retired employees.
We measure the plan assets and benefit obligations of our pension plans and postretirement plans at December 31 of each year.
We base the discount rates for our plans on a yield curve developed from a model portfolio of high-quality corporate bonds with
durations that match the expected future cash flows of the pension and postretirement benefit obligations.
▪
were as follows at December 31:
Obligations and Funded Status: Benefit obligations, plan assets and funded status for our pension and postretirement plans
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial (gains) losses
Plan amendments
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Funded status at December 31
Amounts recognized on our consolidated balance sheets:
Other assets
Other accrued liabilities
Accrued pension costs
Accrued postretirement health care costs
Pension
2023
2022
Postretirement
2022
2023
$
6,292 $
39
333
(460)
224
—
6,428
6,603
612
20
(460)
6,775
8,544
64
206
(462)
(2,060)
—
6,292
8,793
(1,748)
20
(462)
6,603
$
1,275 $
15
65
(96)
(10)
(3)
1,246
122
13
—
(33)
102
1,688
23
41
(87)
(392)
2
1,275
185
(35)
—
(28)
122
347 $
311
$
(1,144) $
(1,153)
506 $
(29)
(130)
—
$
347 $
469
(25)
(133)
—
311
$
— $
(65)
—
—
(70)
—
(1,079)
(1,083)
$
(1,144) $
(1,153)
$
$
The table above presents the projected benefit obligation for our pension plans. The accumulated benefit obligation, which represents
benefits earned to date, for our pension plans was $6.3 billion and $6.1 billion at December 31, 2023 and 2022, respectively.
Actuarial losses for our pension plans for the year ended December 31, 2023 were due primarily to a lower discount rate. Actuarial
gains for our postretirement plans for the year ended December 31, 2023 were due primarily to a planned change in healthcare provider
and other items, partially offset by actuarial losses attributable to a lower discount rate. Actuarial gains for the year ended December 31,
2022 for our pension and postretirement plans were due primarily to a higher discount rate.
For pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2023 and 2022, our accumulated benefit
obligation was $142 million and $134 million, respectively. Additionally, at December 31, 2023 and 2022, there were no plan assets for
these plans.
For pension plans with projected benefit obligations in excess of plan assets at December 31, 2023 and 2022, our projected benefit
obligation was $159 million and $158 million, respectively. Additionally, at December 31, 2023 and 2022, there were no plan assets for
these plans.
At December 31, 2023 and 2022, our accumulated postretirement benefit obligations were in excess of plan assets for all postretirement
plans.
81
81
We used the following assumptions to determine our pension and postretirement benefit obligations at December 31:
Discount rate
Rate of compensation increase - long-term
Health care cost trend rate assumed for next year
Ultimate trend rate
Year that the rate reaches the ultimate trend rate
Pension
Postretirement
2023
2022
2023
2022
5.3 %
4.0
—
—
—
5.6 %
4.0
—
—
—
5.2 %
—
6.5
5.0
2031
5.6 %
—
6.5
5.0
2028
▪
years ended December 31:
Components of Net Periodic Benefit Cost (Income): Net periodic benefit cost (income) consisted of the following for the
(in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization:
Net loss (gain)
Prior service cost (credit)
Net periodic benefit cost (income)
2023
Pension
2022
2021
2023
Postretirement
2022
2021
$
$
39 $
333
(485)
4
6
(103) $
64 $
206
(493)
96
6
(121) $
68
184
(522)
131
5
(134)
$
$
15 $
65
(8)
(2)
(40)
30 $
23 $
41
(13)
18
(45)
24 $
20
38
(14)
22
(46)
20
The following assumptions were used to determine our net periodic benefit cost (income) for the years ended December 31:
Discount rates:
Service cost
Interest cost
Expected rate of return on plan assets
Rate of compensation increase - long-term
Health care cost trend rate
2023
Pension
2022
2021
2023
2022
2021
Postretirement
5.7 %
3.2 %
3.1 %
5.7 %
3.2 %
3.1 %
5.5
6.1
4.0
—
2.5
6.1
4.0
—
2.0
6.6
4.0
—
5.5
7.4
—
6.5
2.5
7.7
—
6.5
2.0
7.7
—
6.5
Defined Contribution Plans: We sponsor tax-qualified defined contribution plans covering certain salaried and hourly (non-
▪
union and union) employees. Contributions and costs are determined generally as a percentage of earnings, as defined by our plans.
Amounts charged to expense for these defined contribution plans totaled $109 million, $91 million and $90 million in 2023, 2022 and
2021, respectively.
Pension and Postretirement Plan Assets: In managing our pension assets, we implement a liability-driven investment
▪
framework that aligns plan assets with liabilities. The current equity/fixed income target allocation of 20%/80% is designed to balance
pension liability hedging and asset growth in order to maintain our plan’s funded status and cover incremental service accruals and
interest cost. Liability hedging is achieved through investing in rate-sensitive fixed income securities, primarily corporate bonds and
U.S. Treasuries, while growth assets are comprised of publicly traded equity securities.
Our investment strategy for our postretirement plan assets is intended to maximize our total asset return based on the expectation that
equity securities will outperform debt securities over the long term and reflects the maturity structure of our benefit obligation. The
equity/fixed income target allocation for postretirement plan assets is 55%/45%.
We believe that we implement these investment strategies in a prudent and risk-controlled manner, consistent with the fiduciary
requirements of the Employee Retirement Income Security Act of 1974, by investing retirement plan assets in a well-diversified mix of
equities, fixed income and other securities.
82
82
The actual composition of our plan assets at December 31, 2023 was broadly characterized with the following allocation:
Pension
Postretirement
Equity securities
Corporate bonds
U.S. Treasury and foreign government securities and all other investments
(1) Amount includes U.S Treasury and foreign government securities (19%) and asset backed securities and all other investments (6%).
18 %
57 %
25 % (1)
53 %
31 %
16 %
Our pension and postretirement plan asset performance is monitored on an ongoing basis to adjust the mix as necessary to achieve our
target allocations.
Substantially all pension and all postretirement assets can be used to make monthly benefit payments.
We implement our investment strategy for our pension and postretirement plan assets by investing in long-duration fixed income
securities that primarily include U.S. corporate bonds of companies from diversified industries and U.S. Treasury securities that mirror
our pension obligation benchmark, as well as U.S. and international equity index strategies that are intended to mirror broad market
indices, including, the Standard & Poor’s 500 Index and Morgan Stanley Capital International (“MSCI”) Europe, Australasia, and the
Far East (“EAFE”) Index. Our pension and postretirement plans also invest in actively managed international equity securities of mid
and small cap companies located in developed and emerging markets. For pension plan assets, our allocation to below investment grade
securities represented approximately 11% of the fixed income holdings or approximately 9% of our total plan assets at December 31,
2023. Our allocation to emerging markets represented approximately 2% of total plan assets at December 31, 2023. For postretirement
plan assets, our allocation to below investment grade securities represented approximately 9% of the fixed income holdings or
approximately 4% of our total plan assets at December 31, 2023. Also, less than 1% of postretirement plan assets was invested in
emerging markets at December 31, 2023.
Our risk management practices for our pension and postretirement plans include (i) ongoing monitoring of asset allocation, investment
performance and investment managers’ compliance with their investment guidelines, (ii) periodic rebalancing between equity and debt
asset classes and (iii) annual actuarial re-measurement of plan liabilities.
Our expected rate of return on pension and postretirement plan assets is determined by our plan assets’ historical long-term investment
performance, current asset allocation and estimates of future long-term returns by asset class. The forward-looking estimates are
consistent with the long-term historical averages exhibited by returns on equity and fixed income securities. For determining our
pension and postretirement net periodic benefit cost (income), our 2024 expected rate of return assumptions are 6.1% and 7.4%,
respectively.
83
83
The fair values of our pension plan assets by asset category were as follows at December 31:
(in millions)
U.S. and foreign government securities or their agencies:
U.S. government and agencies
U.S. municipal bonds
Foreign government and agencies
Corporate debt instruments:
Above investment grade
Below investment grade and no rating
Common stock:
International equities
U.S. equities
Asset backed securities
Other, net
Investments measured at NAV as a practical expedient for fair
value:
Level 1
2023
Level 2
Total
Level 1
2022
Level 2
Total
$
— $ 1,114
81
—
33
—
$ 1,114
81
33
$
— $ 1,098
82
—
32
—
$ 1,098
82
32
—
—
3,160
716
3,160
716
—
—
2,747
756
2,747
756
—
360
—
323
279
—
47
154
730 $ 5,537
360
323
279
201
$ 6,267
$
327
591
—
(1)
—
—
161
244
917 $ 5,120
327
591
161
243
$ 6,037
$
Collective investment funds
U.S. large cap
U.S. small cap
International developed markets
Total investments measured at NAV
Other
Fair value of plan assets, net
$
388
90
55
$
533
(25)
$ 6,775
$
312
75
49
$
436
130
$ 6,603
Level 3 holdings and transactions were immaterial to total plan assets at December 31, 2023 and 2022.
84
84
The fair values of our postretirement plan assets were as follows at December 31:
(in millions)
U.S. and foreign government securities or their agencies:
U.S. government and agencies
Foreign government and agencies
Corporate debt instruments:
Above investment grade
Below investment grade and no rating
Other, net
Investments measured at NAV as a practical expedient for fair
value:
Collective investment funds:
U.S. large cap
International developed markets
Total investments measured at NAV
Other
Fair value of plan assets, net
Level 1
2023
Level 2
Total
Level 1
2022
Level 2
Total
$
$
— $
—
—
—
1
1 $
$
$
— $
—
—
—
—
— $
$
4
2
31
4
3
44
$
$
$
$
4
2
31
4
4
45
44
11
55
2
102
$
5
2
37
7
3
54
$
$
$
$
5
2
37
7
3
54
47
18
65
3
122
There were no Level 3 postretirement plan holdings or transactions during 2023 and 2022.
For a description of the fair value hierarchy and the three levels of inputs used to measure fair value, see Note 2. Summary of Significant
Accounting Policies.
Following is a description of the valuation methodologies used for investments measured at fair value.
▪
▪
▪
▪
▪
U.S. and Foreign Government Securities: U.S. and foreign government securities consist of investments in Treasury Nominal Bonds
and Inflation Protected Securities and municipal securities. Government securities are valued at a price that is based on a
compilation of primarily observable market information, such as broker quotes. Matrix pricing, yield curves and indices are used
when broker quotes are not available.
Corporate Debt Instruments: Corporate debt instruments are valued at a price that is based on a compilation of primarily observable
market information, such as broker quotes. Matrix pricing, yield curves and indices are used when broker quotes are not available.
Common Stock: Common stocks are valued based on the price of the security as listed on an open active exchange on last trade date.
Asset Backed Securities: Asset backed securities are fixed income securities such as mortgage backed securities and auto loans that
are collateralized by pools of underlying assets that are unable to be sold individually. They are valued at a price that is based on a
compilation of primarily observable market information or a broker quote in a non-active over-the-counter market.
Collective Investment Funds: Collective investment funds consist of funds that are intended to mirror indices such as Standard &
Poor’s 500 Index and MSCI EAFE Index. They are valued on the basis of the relative interest of each participating investor in the
fair value of the underlying assets of each of the respective collective investment funds, which are valued based on the net asset
value (“NAV”), and are provided by the investment account manager as a practical expedient to estimate fair value. These
investments are not classified by level but are disclosed to permit reconciliation to the fair value of plan assets.
Cash Flows: We make contributions to our pension plans to the extent that the contributions are tax deductible and pay benefits that
relate to plans for salaried employees that cannot be funded under IRS regulations. Currently, we anticipate making employer
contributions to our pension and postretirement plans of up to approximately $30 million for each in 2024. However, the foregoing
estimates of 2024 contributions to our pension and postretirement plans are subject to change as a result of changes in tax and other
benefit laws, changes in interest rates, as well as asset performance significantly above or below the assumed long-term rate of return for
each respective plan.
85
85
Estimated future benefit payments at December 31, 2023 were as follows:
(in millions)
2024
2025
2026
2027
2028
2029-2033
Pension
Postretirement
$
494 $
478
478
479
481
2,362
96
91
90
90
92
461
Comprehensive Earnings/Losses
We recorded the following amounts in accumulated other comprehensive losses at December 31, 2023:
(in millions)
Net (loss) gain
Prior service (cost) credit
Deferred income taxes
Pension
Post-
retirement
Post-
employment
Total
$
(2,236) $
(18)
585
19 $
256
(67)
208 $
(39) $
(5)
12
(32) $
(2,256)
233
530
(1,493)
Amounts recorded in accumulated other comprehensive losses
$
(1,669) $
We recorded the following amounts in accumulated other comprehensive losses at December 31, 2022:
(in millions)
Net (loss) gain
Prior service (cost) credit
Deferred income taxes
Pension
Post-
retirement
Post-
employment
Total
$
(2,180) $
1 $
(34) $
(2,213)
(24)
571
293
(68)
(5)
10
264
513
Amounts recorded in accumulated other comprehensive losses
$
(1,633) $
226 $
(29) $
(1,436)
The movements in other comprehensive earnings (losses) for the year ended December 31, 2023 were as follows:
(in millions)
Amounts reclassified to net earnings as components of net periodic
benefit cost (income):
Pension
Post-
retirement
Post-
employment
Total
Amortization:
Net loss (gain)
Prior service cost (credit)
Deferred income taxes
Other movements during the year:
Net (loss) gain
Prior service (cost) credit
Deferred income taxes
Total movements in other comprehensive earnings (losses)
$
$
$
$
$
4 $
(2) $
6 $
6
(2)
(40)
11
—
(1)
8 $
(31) $
5 $
8
(34)
8
(18)
(60) $
20 $
(11) $
(51)
—
16
(44) $
(36) $
3
(10)
13 $
(18) $
—
3
(8) $
(3) $
3
9
(39)
(57)
86
86
The movements in other comprehensive earnings (losses) for the year ended December 31, 2022 were as follows:
(in millions)
Amounts reclassified to net earnings as components of net periodic
benefit cost (income):
Amortization:
Net loss (gain)
Prior service cost (credit)
Deferred income taxes
Other movements during the year:
Net (loss) gain
Prior service (cost) credit
Deferred income taxes
Total movements in other comprehensive earnings (losses)
Pension
Post-
retirement
Post-
employment
Total
$
$
$
$
$
96 $
6
(26)
76 $
(183) $
—
48
(135) $
(59) $
18 $
(45)
7
(20) $
345 $
(2)
(87)
256 $
236 $
13 $
—
(3)
10 $
(15) $
—
4
(11) $
(1) $
127
(39)
(22)
66
147
(2)
(35)
110
176
The movements in other comprehensive earnings (losses) for the year ended December 31, 2021 were as follows:
(in millions)
Amounts reclassified to net earnings as components of net periodic
benefit cost (income):
Amortization:
Net loss (gain)
Prior service cost (credit)
Deferred income taxes
Other movements during the year:
Net (loss) gain
Prior service (cost) credit
Deferred income taxes
Total movements in other comprehensive earnings (losses)
Note 18. Additional Information
(in millions)
Research and development expense
Interest and other debt expense, net:
Interest expense
Interest income
Pension
Post-
retirement
Post-
employment
Total
$
$
$
$
$
131 $
22 $
10 $
5
(35)
(46)
7
—
(2)
101 $
(17) $
8 $
465 $
157 $
2 $
(8)
(118)
339 $
440 $
345
(127)
375 $
358 $
—
—
2 $
10 $
163
(41)
(30)
92
624
337
(245)
716
808
For the Years Ended December 31,
2023
2022
2021
220 $
162 $
145
1,149 $
(160)
989 $
1,128 $
(70)
1,058 $
1,188
(26)
1,162
$
$
$
87
87
The activity in the allowance for discounts and allowance for returned goods was as follows:
(in millions)
2023
For the Years Ended December 31,
2022
2021
Discounts
Returned
Goods
Discounts
Returned
Goods
Discounts
Returned
Goods
$
Balance at beginning of year
Charged to costs and expenses
Deductions (1)
Balance at end of year
(1) Represents the recording of discounts and returns for which allowances were created.
— $
597
(597)
41
118
(120)
39
— $
$
$
$
— $
607
(607)
— $
50
97
(106)
41
$
$
— $
647
(647)
— $
40
124
(114)
50
Note 19. Contingencies
Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against
Altria and certain of our subsidiaries, including PM USA and NJOY, as well as our indemnitees. Various types of claims may be raised
in these proceedings, including product liability, unfair trade practices, antitrust, income tax liability, contraband shipments, patent
infringement, employment matters, claims alleging violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”),
claims for contribution and claims of competitors, shareholders or distributors. Legislative action, such as changes to tort law, also may
expand the types of claims and remedies available to plaintiffs.
Litigation is subject to uncertainty, and it is possible that there could be adverse developments in pending or future cases. An
unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional
litigation. Damages claimed in some tobacco-related and other litigation are or can be significant and, in certain cases, have ranged in
the billions of dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in
litigating claims, demonstrates that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome.
In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, we may face the risk that one or more co-
defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated
share of a judgment. As a result, under certain circumstances, we may have to pay more than our proportionate share of any bonding- or
judgment-related amounts. Furthermore, in those cases where plaintiffs are successful, we also may be required to pay interest and
attorneys’ fees.
Although PM USA historically has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs
from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable
in all cases. This risk has been substantially reduced given that 47 states and Puerto Rico limit the dollar amount of bonds or require no
bond at all. However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases,
and plaintiffs may challenge state bond cap statutes in other jurisdictions as well. Such challenges may include the applicability of state
bond caps in federal court. States, including Florida, also may seek to repeal or alter bond cap statutes through legislation. Although we
cannot predict the outcome of such challenges, it is possible that our consolidated results of operations, cash flows or financial position
could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.
We record provisions in our consolidated financial statements for pending litigation when we determine that an unfavorable outcome is
probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable
outcome in a case may occur, except to the extent discussed elsewhere in this Note 19. Contingencies: (i) management has concluded
that it is not probable that a loss has been incurred in any of the pending cases; (ii) management is unable to estimate the possible loss or
range of loss that could result from an unfavorable outcome in any of the pending cases; and (iii) accordingly, management has not
provided any amounts in our consolidated financial statements for unfavorable outcomes, if any. Litigation defense costs are expensed
as incurred.
We have achieved substantial success in managing litigation. Nevertheless, litigation is subject to uncertainty and significant challenges
remain. It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a
particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. We believe, and have been
so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid
bases for appeal of adverse verdicts. We have defended, and will continue to defend, vigorously against litigation challenges. However,
we may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.
88
88
Judgments Paid and Provisions for Tobacco and Health (Including Engle Progeny Litigation) and Certain Other Litigation
Items: The changes in our accrued liability for tobacco and health and certain other litigation items, including related interest costs, for
the periods specified below are as follows:
(in millions)
Accrued liability for tobacco and health and certain other litigation items at beginning of
period
2023
2022
2021
$
71
$
91
$
9
Pre-tax charges for:
Tobacco and health and certain other litigation (1)
Shareholder class action and shareholder derivative lawsuits (2)
JUUL-related settlements (3)
Related interest costs
79
98
242
11
(155)
346
101
27
—
3
(151)
71
83
90
—
9
(100)
91
Payments
Accrued liability for tobacco and health and certain other litigation items at end of period
(1) Includes judgments, settlements and fee disputes associated with tobacco and health and certain other litigation.
(2) See Shareholder Class Action and Shareholder Derivative Lawsuits - Federal and State Shareholder Derivative Lawsuits below for a discussion of
$
$
$
the settlement of the federal and state shareholder derivative lawsuits.
(3) Includes the settlement of certain e-vapor product litigation relating to JUUL e-vapor products and the e-vapor product litigation brought by the
attorneys general of Minnesota and Alaska. See E-vapor Product Litigation below for a discussion of these settlements.
The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued
liabilities and other liabilities on our consolidated balance sheets. Pre-tax charges for tobacco and health and certain other litigation were
included in marketing, administration and research costs in our consolidated statements of earnings. Pre-tax charges for related interest
costs were included in interest and other debt expense, net in our consolidated statements of earnings.
After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004,
PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $1 billion and interest totaling
approximately $241 million as of December 31, 2023. These amounts include payments for Engle progeny judgments (and related costs
and fees) totaling approximately $440 million and related interest totaling approximately $60 million.
Security for Judgments: To obtain stays of judgments pending appeal, PM USA has posted various forms of security. As of December
31, 2023, PM USA has posted appeal bonds totaling approximately $35 million, which have been collateralized with restricted cash and
are included in assets on our consolidated balance sheets.
Overview of Tobacco-Related Litigation
Types and Number of U.S. Cases: Claims related to tobacco products generally fall within the following categories: (i) smoking and
health cases alleging personal injury brought on behalf of individual plaintiffs; (ii) health care cost recovery cases brought by
governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette
smoking and/or disgorgement of profits; (iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence,
antitrust, patent infringement and unfair trade practices; and (iv) other tobacco-related litigation described below. Plaintiffs’ theories of
recovery and the defenses raised in tobacco-related litigation are discussed below.
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89
The table below lists the number of certain tobacco-related cases pending in the United States against us as of December 31:
Individual Smoking and Health Cases (1)
Health Care Cost Recovery Actions (2)
E-vapor Cases (3)
Other Tobacco-Related Cases (4)
2023
172
1
5,177
3
2022
162
1
5,283
3
2021
176
1
3,296
3
(1) Includes as of December 31, 2023, 16 cases filed in Illinois, 16 cases filed in New Mexico, 58 cases filed in Massachusetts and 48 non-Engle cases
filed in Florida. Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts
following the decertification of the Engle class (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Progeny
Cases). Also does not include 1,385 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by
exposure to environmental tobacco smoke (“ETS”). The flight attendants allege that they are members of an ETS smoking and health class action in
Florida, which was settled in 1997 (Broin). The terms of the court-approved settlement in that case allowed class members to file individual lawsuits
seeking compensatory damages but prohibited them from seeking punitive damages. Class members were prohibited from filing individual lawsuits
after 2000 under the court-approved settlement.
(2) See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below.
(3) Includes as of December 31, 2023, 57 class action lawsuits, 3,614 individual lawsuits and 1,506 “third party” lawsuits relating to the Multidistrict
Litigation discussed under E-vapor Product Litigation below. The 57 class action lawsuits include 32 cases in the Northern District of California
involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for
procedural and other reasons. In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits. Also
includes three patent infringement lawsuits filed against us and certain of our affiliates. For further discussion of the pending Multidistrict Litigation
settlement and patent infringement litigation, see E-vapor Product Litigation below.
(4) Includes as of December 31, 2023, one inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of
individual plaintiffs and two inactive class action lawsuits alleging that use of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair
trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of RICO.
International Tobacco-Related Cases: As of January 29, 2024, (i) Altria is named as a defendant in three e-vapor class action lawsuits
in Canada; (ii) PM USA is a named defendant in 10 health care cost recovery actions in Canada, eight of which also name Altria as a
defendant; and (iii) PM USA and Altria are named as defendants in seven smoking and health class actions filed in various Canadian
provinces. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement (defined below) between
Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products.
Tobacco-Related Cases Set for Trial: As of January 29, 2024, no Engle progeny cases, three individual smoking and health case and
no e-vapor cases are set for trial through March 31, 2024. Trial dates are subject to change.
Trial Results: Since January 1999, excluding the Engle progeny cases (separately discussed below), verdicts have been returned in 80
tobacco-related cases in which PM USA was a defendant. Verdicts in favor of PM USA and other defendants were returned in 49 of the
80 cases. Of the 31 non-Engle progeny cases in which verdicts were returned in favor of plaintiffs, 26 have reached final resolution.
See Smoking and Health Litigation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny
cases involving PM USA as of January 29, 2024.
Smoking and Health Litigation
Overview: Plaintiffs’ allegations of liability in smoking and health cases are based on various theories of recovery, including
negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and
implied warranties, breach of special duty, conspiracy, concert of action, violations of unfair trade practice laws and consumer protection
statutes and claims under the federal and state anti-racketeering statutes. Plaintiffs in the smoking and health cases seek various forms of
relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages and penalties, creation of
medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief. Defenses raised in these
cases include lack of proximate cause, assumption of the risk, comparative fault and/or contributory negligence, statutes of limitations
and preemption by the Federal Cigarette Labeling and Advertising Act.
Non-Engle Progeny Litigation: Summarized below are the non-Engle progeny smoking and health cases pending during 2023 (or
recently concluded) in which a verdict was returned in favor of plaintiff and against PM USA. Charts listing certain verdicts for
plaintiffs in the Engle progeny cases can be found in Smoking and Health Litigation - Engle Progeny Trial Results below.
Roach: In December 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding less than
$1 million in compensatory damages and allocating 39% of the fault to PM USA. The jury found that plaintiff was not entitled to
punitive damages. Final judgment not yet been entered. We intend to file post-trial motions challenging the verdict and will, if
necessary, appeal.
Ricapor-Hall: In August 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding $6
million in compensatory damages and $8 million in punitive damages. In October 2023, the court entered judgment against PM USA for
90
90
$11 million, having reduced the compensatory damages award to $3 million based on the jury’s finding on comparative fault and a set-
off against plaintiff’s settlements with other defendants, and we filed post-trial motions challenging the verdict. If necessary, we will
appeal any portion of the judgment that remains following resolution of the post-trial motions.
Deswert: In May 2023, a jury in a Pennsylvania state court returned a verdict in favor of plaintiff and against PM USA, awarding less
than $1 million in compensatory damages and allocating 50% of the fault to PM USA. Despite the comparative fault finding, the
compensatory damages award would not have been reduced due to the jury’s finding for plaintiff on the strict liability claim. Plaintiff’s
claim for punitive damages was dismissed prior to the trial. In lieu of appealing the trial court’s verdict, PM USA settled plaintiff’s
claims in July 2023 and recorded a pre-tax charge of less than $1 million in the third quarter of 2023.
Woodley: In February 2023, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding
$5 million in compensatory damages. There was no claim for punitive damages. Following the denial of PM USA’s post-trial motions,
PM USA appealed the judgment to the Appeals Court of Massachusetts, and the appeal remains pending.
Fontaine: In September 2022, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding
approximately $8 million in compensatory damages and $1 billion in punitive damages. In September 2023, the court denied PM USA’s
motion for a new trial and partially granted PM USA’s motion for remittitur, reducing the punitive damages award to $56 million. In
December 2023, the court entered a final judgment awarding plaintiff $8 million in compensatory damages, $56 million in punitive
damages and prejudgment interest. PM USA intends to appeal.
Greene: In September 2019, a jury in a Massachusetts state court returned a verdict in favor of plaintiffs and against PM USA, awarding
approximately $10 million in compensatory damages. In May 2020, the court ruled on plaintiffs’ remaining claim and trebled the
compensatory damages award to approximately $30 million. In February 2021, the trial court awarded plaintiffs attorneys’ fees and
costs in the amount of approximately $2.3 million. PM USA appealed the judgment, and, in May 2023, the Massachusetts Supreme
Judicial Court affirmed the trial court judgment and orders denying PM USA’s post-trial motions, concluding the case. We recorded a
pre-tax charge of approximately $48 million and paid the recorded amount in the second quarter of 2023.
Federal Government’s Lawsuit: See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below for a discussion of
the verdict and post-trial developments in the United States of America health care cost recovery case.
Engle Progeny Cases: Engle progeny cases are individual smoking and health lawsuits filed by Florida resident plaintiffs against one or
more cigarette manufacturer defendants. The lawsuits arose following the Florida Supreme Court’s decertification of the class in Engle,
et. al. v. R.J. Reynolds Tobacco Co., et. al., a smoking and health class action lawsuit filed in Florida state court against multiple
defendants, including PM USA, in which the jury returned a verdict in favor of the plaintiff class and the trial court assessed punitive
damages against the defendants. In July 2006, the Florida Supreme Court mandated that the trial court’s punitive damages award be
vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions
against defendants within one year of issuance of the mandate. Plaintiffs in Engle progeny lawsuits are entitled to rely on certain
liability findings from the class action lawsuit, substantially reducing each plaintiff’s burden of proof. These liability findings stipulate:
(i) that smoking causes various diseases; (ii) that nicotine in cigarettes is addictive; (iii) that defendants’ cigarettes were defective and
unreasonably dangerous; (iv) that defendants concealed or omitted material information not otherwise known or available knowing that
the material was false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking; (v)
that defendants agreed to misrepresent information regarding the health effects or addictive nature of cigarettes with the intention of
causing the public to rely on this information to their detriment; (vi) that defendants agreed to conceal or omit information regarding the
health effects of cigarettes or their addictive nature with the intention that smokers would rely on the information to their detriment; (vii)
that all defendants sold or supplied cigarettes that were defective; and (viii) that defendants were negligent.
Pending Engle Progeny Cases: The deadline for filing Engle progeny cases expired in January 2008, at which point a total of
approximately 9,300 federal and state claims were pending. As of January 29, 2024, approximately 345 state court cases were pending
against PM USA or Altria asserting individual claims by or on behalf of approximately 441 state court plaintiffs. Because of a number
of factors, including docketing delays, duplicated filings and overlapping dismissal orders, these numbers are estimates. Each federal
Engle progeny case has been resolved.
Engle Progeny Trial Results: As of January 29, 2024, 145 federal and state Engle progeny cases involving PM USA have resulted in
verdicts. Eighty-seven were returned in favor of plaintiffs, six of which have been reversed post-trial or on appeal and remain pending.
Fifty-eight verdicts were returned in favor of PM USA, two of which have been reversed post-trial or on appeal and remain pending. In
addition, there have been a number of mistrials, only some of which have resulted in new trials as of January 29, 2024.
Post-trial activity in a case can result in final resolution that differs from the initial verdict. In many cases, parties have appealed either
compensatory or punitive damages awards or both. Courts also have increased and decreased the amounts of punitive damages juries
have awarded, declared mistrials and vacated judgments, in whole or in part, with respect to compensatory and punitive damages
awards. Initial verdicts have been reversed in whole or in part on appeal or following retrial. Juries have returned verdicts in favor of or
against PM USA awarding no damages. In cases where juries returned verdicts against PM USA awarding no damages, some trial
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courts have decided to award plaintiff damages notwithstanding the verdict. Cases also have been dismissed with or without prejudice
before or after a verdict.
The charts below list the verdicts in and post-trial status of certain Engle progeny cases in which verdicts were returned in favor of
plaintiffs. The first chart lists cases that are pending as of January 29, 2024 where PM USA has determined an unfavorable outcome is
not probable and the amount of loss cannot be reasonably estimated, and the second chart lists cases that have concluded in the past 12
months. In this Note 19. Contingencies, references to “R.J. Reynolds” are to R.J. Reynolds Tobacco Company. Unless otherwise noted
for a particular case, the jury’s award for compensatory damages will not be reduced by any finding of plaintiff’s comparative fault.
Further, the damages noted reflect adjustments based on post-trial or appellate rulings.
Currently Pending Engle Cases with Verdicts Against PM USA
(rounded to nearest $ million)
Plaintiff
Ferraiuolo
Verdict Date
November 2023
Defendant(s) Court
PM USA and
Duval
R.J. Reynolds
Chacon
October 2023
PM USA
Miami-Dade
Hoffman
January 2023
PM USA
Miami-Dade
Compensatory
Damages(1)
$1 million (<$1
million PM
USA)
<$1 million
$5 million ($3
million PM
USA)
$1 million
Punitive
Damages
(PM USA)
$10 million
<$1 million
$0
$0
$0
Post-Trial Status
Post-trial motions pending.
Appeals to the Third District Court of Appeal
pending.
Appeal to the Third District Court of Appeal
pending.
Appeals to the Third District Court of Appeal
pending.
Appeal to the Third District Court of Appeal
pending.
Appeal to the Third District Court of Appeal
pending.
Retrial of punitive damages claim pending.
<$1 million
Post-trial motions pending.
Appeal to the Third District Court of Appeal
pending.
Appeal to the Fourth District Court of Appeal
pending.
Retrial of punitive damages claim pending.
Levine
September 2022
Schertzer
April 2022
PM USA and
R.J. Reynolds
PM USA and
R.J. Reynolds
Miami-Dade
Miami-Dade
$3 million
Lipp
September 2021
PM USA
Miami-Dade
$15 million
$28 million
Duignan
February 2020
PM USA and
R.J. Reynolds
Pinellas
McCall
March 2019
PM USA
Broward
Chadwell
September 2018
PM USA
Miami-Dade
$3 million ($1
million PM
USA)
<$1 million
(<$1 million PM
USA)
$2 million
Kaplan
(McLaughlin)
July 2018
PM USA and
R.J. Reynolds
Broward
$2 million
$0
$0
$0
September 2015
Cooper
(Blackwood)
$5 million
(<$1 million PM
USA)
(1) PM USA’s portion of the compensatory damages award is noted parenthetically where the court has ruled that comparative fault applies.
PM USA and
R.J. Reynolds
Broward
$0
Engle Cases Concluded Within Past 12 Months
(rounded to nearest $ million)
Verdict Date
September 2022 PM USA and R.J.
Defendant(s)
Reynolds
Court
Miami-Dade
Accrual Date
Third quarter of 2022
Payment Amount for
Damages (if any)
<$1 million
Payment Date
December 2022
August 2022
PM USA
Duval
Third quarter of 2022
<$1 million
May 2021
PM USA
Holliman
February 2019
PM USA
Miami-Dade
Miami-Dade
Fourth quarter of 2023
$3 million
Fourth quarter of 2022
$3 million
October 2022
December 2023
January 2023
Plaintiff
Miller
Tuttle
Garcia
Other Smoking and Health Class Actions: Since the dismissal in May 1996 of a purported nationwide class action brought on behalf
of allegedly addicted smokers, plaintiffs have filed numerous putative smoking and health class action suits in various state and federal
courts. In general, these cases have purported to be brought on behalf of residents of a particular state or states (although a few cases
have purported to be nationwide in scope) and have raised addiction claims and, in many cases, claims of physical injury as well.
Class certification has been denied or reversed by courts in 61 smoking and health class actions involving PM USA in Arkansas (1),
California (1), Delaware (1), the District of Columbia (2), Florida (2), Illinois (3), Iowa (1), Kansas (1), Louisiana (1), Maryland (1),
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Michigan (1), Minnesota (1), Nevada (29), New Jersey (6), New York (2), Ohio (1), Oklahoma (1), Oregon (1), Pennsylvania (1), Puerto
Rico (1), South Carolina (1), Texas (1) and Wisconsin (1). See Certain Other Tobacco-Related Litigation below for a discussion of
“Lights” and “Ultra Lights” class action cases and medical monitoring class action cases pending against PM USA.
As of January 29, 2024, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in seven class actions
filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario. In Saskatchewan,
British Columbia (two separate cases) and Ontario, plaintiffs seek class certification on behalf of individuals who suffer or have suffered
from various diseases, including chronic obstructive pulmonary disease, emphysema, heart disease or cancer, after smoking defendants’
cigarettes. In the actions filed in Alberta, Manitoba and Nova Scotia, plaintiffs seek certification of classes of all individuals who
smoked defendants’ cigarettes. In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers
(none of which is related to us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter
11 bankruptcy in the United States). The companies entered into these proceedings following a Canadian appellate court upholding two
smoking and health class action verdicts against those companies totaling approximately CAD $13 billion. See Guarantees and Other
Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI, which provides for indemnities for
certain liabilities concerning tobacco products.
Health Care Cost Recovery Litigation
Overview: In the health care cost recovery litigation, governmental entities seek reimbursement of health care cost expenditures
allegedly caused by tobacco products and, in some cases, of future expenditures and damages. Relief sought by some but not all
plaintiffs includes punitive damages, multiple damages and other statutory damages and penalties, injunctions prohibiting alleged
marketing and sales to minors, disclosure of research, disgorgement of profits, funding of anti-smoking programs, additional disclosure
of nicotine yields, and payment of attorney and expert witness fees.
Although there have been some decisions to the contrary, most judicial decisions in the United States have dismissed all or most health
care cost recovery claims against cigarette manufacturers. Nine federal circuit courts of appeals and eight state appellate courts, relying
primarily on grounds that plaintiffs’ claims were too remote, have ordered or affirmed dismissals of health care cost recovery actions.
The U.S. Supreme Court has refused to consider plaintiffs’ appeals from the cases decided by five federal circuit courts of appeal.
In addition to the cases brought in the United States, health care cost recovery actions have been brought against tobacco industry
participants, including PM USA and Altria, in Canada (10 cases), and other entities have stated that they are considering filing such
actions.
Since the beginning of 2008, the Canadian Provinces of British Columbia, New Brunswick, Ontario, Newfoundland and Labrador,
Quebec, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia have brought health care reimbursement claims
against cigarette manufacturers. PM USA is named as a defendant in the British Columbia and Quebec cases, while both Altria and PM
USA are named as defendants in the New Brunswick, Ontario, Newfoundland and Labrador, Alberta, Manitoba, Saskatchewan, Prince
Edward Island and Nova Scotia cases. The Nunavut Territory and Northwest Territory have passed legislation permitting similar claims,
but lawsuits based on this legislation have not been filed. All of these cases have been stayed pending resolution of proceedings in
Canada involving three tobacco manufacturers (none of which are affiliated with us) under the Companies’ Creditors Arrangement Act
discussed above. See Smoking and Health Litigation - Other Smoking and Health Class Actions above for a discussion of these
proceedings. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI
that provides for indemnities for certain liabilities concerning tobacco products.
Settlements of Health Care Cost Recovery Litigation: In November 1998, PM USA and certain other tobacco product manufacturers
entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain United States territories
to settle asserted and unasserted health care cost recovery and other claims. PM USA and certain other tobacco product manufacturers
had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the
MSA, the “State Settlement Agreements”). The State Settlement Agreements require that the original participating manufacturers or
“OPMs” (now PM USA, R.J. Reynolds and, with respect to certain brands, ITG Brands, LLC (“ITG”)) make annual payments of
approximately $10.4 billion, subject to adjustments for several factors, including inflation, market share and industry volume. In
addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $500 million, on a pro rata basis
based on market share. These quarterly payments are expected to end in the fourth quarter of 2024. For the years ended December 31,
2023, 2022 and 2021, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately
$3.7 billion, $3.9 billion and $4.3 billion, respectively. These amounts include PM USA’s estimate of amounts related to NPM
Adjustments discussed below.
NPM Adjustment Disputes: The “NPM Adjustment” is a reduction in MSA payments made by the OPMs and those manufacturers that
are subsequent signatories to the MSA (collectively, the “participating manufacturers” or “PMs”) that applies if the PMs collectively
lose at least a specified level of market share to non-participating manufacturers since 1997, subject to certain conditions and defenses.
The applicability of this reduction has been subject to certain disputes, some of which have been resolved via settlement, as discussed
below.
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Settlements of NPM Adjustment Disputes.
▪ Multi-State Settlement. As of January 2022, a total of 36 states and territories had settled NPM Adjustment disputes relating to
varying periods of time. In March 2022 and August 2023, Illinois and Iowa, respectively, joined the multi-state settlement, bringing
the total number of states and territories that have joined the multi-state settlement to 38. In the first quarter of 2022, PM USA
recorded $80 million, $20 million of which related to the 2019 through 2021 “transition years,” as a reduction in cost of sales as a
result of Illinois joining the multi-state settlement. As a result of Iowa joining the multi-state settlement, PM USA will receive
approximately $19 million for 2005 through 2022, $4 million of which relates to the 2020 through 2022 “transition years.”
Accordingly, PM USA recorded $19 million as a reduction in cost of sales in the third quarter of 2023. Pursuant to the multi-state
settlement, PM USA has received $1.24 billion since the first group of states entered the NPM Adjustment dispute settlement in
2014 and expects to receive approximately $353 million in credits to offset PM USA’s MSA payments through 2039.
▪
New York Settlement. In 2015, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM
Adjustment disputes with New York in perpetuity. PM USA has received $503 million pursuant to the New York settlement and
expects to receive annual credits applied against the MSA payments due to New York going forward.
▪ Montana Settlement. In 2020, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM
Adjustment disputes with Montana through 2030, resulting in a payment from PM USA to Montana for an immaterial amount.
Continuing NPM Adjustment Disputes with States That Have Not Settled.
▪
▪
▪
2004 NPM Adjustment. The PMs and the nine states that had not settled the NPM Adjustment disputes for 2004 participated in a
multi-state arbitration. Iowa subsequently joined the multistate settlement in August 2023. The arbitration panel found three of the
remaining eight states that have not settled the NPM Adjustment disputes, Washington, Missouri and New Mexico, were not
diligent in the enforcement of their escrow statutes in 2004, and PM USA received approximately $52 million on account of the
2004 NPM Adjustment as a credit against its April 2023 MSA payment. PM USA recorded $44 million and $8 million in third
quarter of 2021 and fourth quarter of 2022, respectively. Washington, Missouri and New Mexico have challenged those
determinations in their respective state courts, and several issues remain to be resolved by the state trial and appellate courts that
may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.
2005-2007 NPM Adjustments. The PMs and the eight states that have not settled the NPM Adjustment disputes are currently
arbitrating NPM Adjustment disputes before a single arbitration panel. The arbitration encompasses three years, 2005-2007, for
seven of the eight states, and one year, 2005, for one state. As of January 29, 2024, the arbitration panel had issued decisions for
Maryland and Washington, finding Maryland diligent for all three years and Washington not diligent for all three years. PM USA
recorded $14 million as a reduction of costs of sales and $21 million as interest income in the fourth quarter of 2023 for its estimate
of the minimum amount of the 2005 through 2007 NPM Adjustment it will receive.
Subsequent Years. No assurance can be given as to when proceedings for 2008 and subsequent years will be scheduled or the
precise form those proceedings will take.
Other Disputes under the State Settlement Agreements: The payment obligations of the tobacco product manufacturers that are
parties to the State Settlement Agreements, as well as the allocations of any NPM Adjustments and related settlements, have been and
may continue to be affected by R.J. Reynolds’s acquisition of Lorillard Tobacco Company in 2015 and its related sale of certain
cigarette brands to ITG (the “ITG transferred brands”). PM USA continues to dispute how the ITG transferred brands are treated in
allocating the NPM Adjustments and profit adjustments under the State Settlement Agreements.
In December 2019, the State of Mississippi filed a motion in Mississippi state court seeking to enforce the Mississippi State Settlement
Agreement against PM USA, R.J. Reynolds and ITG concerning the tax rates used in the annual calculation of the net operating profit
adjustment payments starting in 2018. The Mississippi state court held a hearing in October 2021 and issued a decision in June 2022
granting the State’s motion. Further proceedings remain outstanding, and a final judgment has not yet been issued.
In May 2023, PM USA and R.J. Reynolds filed a motion in the United States District Court for the Eastern District of Texas seeking to
enforce the Texas State Settlement Agreement against the State of Texas concerning the same tax rate issue raised by the State of
Mississippi. The State of Texas filed a cross-motion to enforce, and the matter remains pending in the trial court.
In January 2021, PM USA and other PMs reached an agreement with several MSA states to waive the PMs’ claim under the most
favored nation provision of the MSA in connection with a settlement between those MSA states and a non-participating manufacturer,
S&M Brands, Inc. (“S&M Brands”), under which the states released certain claims against S&M Brands in exchange for receiving a
portion of the funds S&M Brands deposited into escrow accounts in those states pursuant to the states’ escrow statutes. In consideration
for waiving its most favored nation claim, PM USA received approximately $32 million from the escrow funds paid to those MSA states
under their settlement with S&M Brands. These funds were received in January 2021 and were recorded in our condensed consolidated
statement of earnings (losses) for the first quarter of 2021 as a reduction in cost of sales.
Federal Government’s Lawsuit: In 1999, the U.S. government filed a lawsuit in the U.S. District Court for the District of Columbia
against various cigarette manufacturers, including PM USA, and others, including Altria, asserting claims under three federal statutes.
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The case ultimately proceeded only under the civil provisions of RICO. In August 2006, the district court held that certain defendants,
including Altria and PM USA, violated RICO and engaged in certain “sub-schemes” to defraud that the government had alleged.
The court did not impose monetary penalties on defendants, but ordered various types of non-monetary relief, including an injunction
against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or
promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one
cigarette brand is less hazardous than another brand, and the issuance of “corrective statements” in various media regarding the adverse
health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar”
or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of
exposure to ETS.
Corrective statements began appearing in newspapers and on television in the fourth quarter of 2017 and on websites in the second
quarter of 2018, and the onserts began appearing in the fourth quarter of 2018. In December 2022, the district court entered a consent
order approving a settlement with respect to corrective statements on point-of-sale signage.
In June 2020, the U.S. government filed a motion with the district court asking for clarification as to whether the court-ordered
injunction that applies to cigarettes discussed above also applies to HeatSticks, a heated tobacco product used with the IQOS System. In
August 2020, we filed an opposition to the government’s motion and, in the alternative, a motion to modify the injunction to make clear
it does not apply to HeatSticks. In July 2023, the district court ruled that HeatSticks are cigarettes as defined in the court ordered
injunction. The district court also ruled that PM USA can make FDA authorized reduced exposure claims about HeatSticks. In
September 2023, PM USA appealed the district court’s ruling that HeatSticks are subject to the court’s injunction. In connection with
our assignment of exclusive U.S. commercialization rights to the IQOS System to PMI, the U.S. government has asserted that the
assignment of those rights required district court approval and was subject to PMI becoming bound by the court-ordered injunction and,
in January 2024, requested that we petition the district court for approval of that agreement.
E-vapor Product Litigation
As of January 29, 2024, we are defendants in 57 class action lawsuits, 3,614 individual lawsuits and 1,506 “third party” lawsuits relating
to JUUL e-vapor products, which include school districts, state and local governments and tribal and healthcare organization lawsuits.
We refer to this litigation collectively as the “Multidistrict Litigation.” The 57 class action lawsuits include 32 cases involving plaintiffs
whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for
procedural and other reasons. Three of the class action lawsuits are pending in Canada. The theories of recovery in the Multidistrict
Litigation include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices. Plaintiffs seek various
remedies, including compensatory and punitive damages, restitution or remediation (for plaintiffs that are government entities) and an
injunction prohibiting product sales.
An additional group of cases is pending in California state courts. In January 2020, the Judicial Council of California determined that
this group of cases was appropriate for coordination and assigned the group to the Superior Court of California, Los Angeles County, for
pretrial purposes.
In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits as well as the group of cases
pending in a consolidated California state court proceeding for $235 million, for which amount we recorded a pre-tax provision in the
second quarter of 2023. In September 2023, the court granted preliminary approval of the class action settlement. The settlement is
conditioned on certain participation rates among plaintiffs, and certain plaintiffs may opt out of the settlement and attempt to continue
litigating their individual cases. The settlement applies to all of the Multidistrict Litigation except 35 “third party” cases brought by
Native American tribes and the three class action lawsuits pending in Canada. The settlement also does not apply to the cases brought
by state attorneys general, discussed below, or 17 putative class actions antitrust lawsuits. For a description of the antitrust cases not
subject to the settlement, see Antitrust Litigation below.
Four of the “third party” lawsuits noted above against us and JUUL were initiated, individually, by the attorneys general of Alaska,
Hawaii, Minnesota and New Mexico alleging violations of state consumer protection and other similar laws. We filed motions to
dismiss the lawsuits. In Alaska, Hawaii, Minnesota and New Mexico, the motions were denied in February 2022, May 2021, June 2021
and December 2023, respectively. In April 2023 and January 2024, we agreed to settle the Minnesota and Alaska lawsuits, respectively,
for immaterial amounts. The trial court in the Hawaii lawsuit has set the trial for February 2024. In January 2024, we agreed to the
terms of a tentative settlement of the Hawaii lawsuit for an immaterial amount. As of January 29, 2024, the trial court in New Mexico
has not set a trial date.
In May 2023, Fuma International LLC (“Fuma”) filed a lawsuit against Altria and our affiliates Nu Mark LLC (“Nu Mark”), AGDC,
ALCS and NJOY in the United States District Court for the Eastern District of Virginia asserting claims of patent infringement based on
the sale of various Nu Mark and NJOY products, including NJOY ACE, in the United States. In August 2023, we entered into an
agreement with Fuma resulting in NJOY’s acquisition of the patents that Fuma asserted in its lawsuit. The parties separately agreed that
Fuma would dismiss its patent infringement claims in exchange for $10 million, and such claims were dismissed in August 2023. We
recorded a pre-tax provision for $10 million in the third quarter of 2023 related to the agreement and paid such amount to Fuma in
August 2023.
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In June 2023, JUUL and VMR Products LLC filed a lawsuit against Altria and our affiliates AGDC, ALCS, NJOY Holdings and NJOY
in the United States District Court for the District of Arizona asserting claims of patent infringement based on the sale of NJOY ACE in
the United States. Plaintiffs seek various remedies, including damages and an injunction on sales of NJOY ACE. The lawsuit is
currently stayed.
Also in June 2023, the same plaintiffs filed a related action against the same defendants with the U.S. International Trade Commission
(“ITC”). There, the plaintiffs also allege patent infringement, but the remedies sought include a prohibition on the importation of NJOY
ACE into the United States. No damages are recoverable in the proceedings before the ITC.
In August 2023, NJOY filed a complaint against JUUL in the United States District Court for the District of Delaware asserting claims
of patent infringement based on the sale of certain JUUL e-vapor products, including the currently marketed JUUL device and
JUULpods, in the United States. The lawsuit is currently stayed. Also in August 2023, NJOY filed a related action against JUUL with
the ITC alleging patent infringement and seeking a ban on the importation and sale of the same JUUL products in the United States.
IQOS Litigation
In April 2020, RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Co., which are affiliates of R.J. Reynolds, filed a lawsuit against
Altria, PM USA, ALCS, PMI and its affiliate, Philip Morris Products S.A., in the U.S. District Court for the Eastern District of Virginia
asserting claims of patent infringement based on the sale of the IQOS System electronic device and Marlboro HeatSticks in the United
States. Plaintiffs seek various remedies, including preliminary and permanent injunctive relief, treble damages and attorneys’ fees.
Altria and PMI were previously dismissed from the lawsuit, and plaintiffs’ claims against the other defendants have been stayed.
PM USA, ALCS and Philip Morris Products S.A. filed counterclaims against plaintiffs in the Eastern District of Virginia lawsuit
alleging patent infringement by R.J. Reynolds’ e-vapor products. In June 2022, PM USA and ALCS reached an agreement with R.J.
Reynolds resulting in dismissal of their counterclaims. In addition, ALCS filed a separate lawsuit against R.J. Reynolds in the U.S.
District Court for the Middle District of North Carolina also alleging patent infringement by R.J. Reynolds’ e-vapor products. In
September 2022, a jury awarded ALCS $95 million in damages for past infringement, plus supplemental damages and interest. In
January 2023, the court ordered R.J. Reynolds to pay ALCS a 5.25% royalty on future sales of its infringing product resulting in positive
net income through the expiration of the relevant patents in 2035. R.J. Reynolds has filed a notice of appeal of the judgment. As gains
related to this lawsuit have not yet been determined to be realized or realizable in accordance with GAAP, they have not been recognized
in our consolidated financial statements for the fiscal year ended December 31, 2023.
In April 2020, a related patent infringement action was filed against the same defendants by the same plaintiffs, as well as R.J. Reynolds,
with the ITC, but the remedies sought included a prohibition on the importation of the IQOS System electronic device, Marlboro
HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.
No damages are recoverable in the proceedings before the ITC. In September 2021, the ITC issued a limited exclusion order barring the
importation of the IQOS System electronic device, Marlboro HeatSticks and the infringing components into the United States and a
cease and desist order barring domestic sales, marketing and distribution of these imported products. The orders became effective in
November 2021. Consequently, PM USA removed the IQOS System electronic device and Marlboro HeatSticks from the marketplace.
In December 2021, defendants appealed the orders to the U.S. Court of Appeals for the Federal Circuit and, in March 2023, the U.S.
Court of Appeals for the Federal Circuit issued its decision affirming the ITC exclusion order in full.
In November 2020, Healthier Choices Management Corp. filed an additional unrelated patent infringement case in the U.S. District
Court for the Northern District of Georgia against PM USA and Philip Morris Products S.A. seeking damages and equitable relief. In
February 2021, defendants filed a motion to dismiss the lawsuit, which the court granted in July 2021. In December 2021, the U.S.
District Court denied plaintiff’s motion to amend the complaint and plaintiff appealed this ruling to the U.S. Court of Appeals for the
Federal Circuit, which reversed the district court’s decision and remanded for further proceedings. On remand, the U.S. District Court
stayed the case pending the outcome of plaintiff’s appeal from a ruling by the U.S. Patent and Trademark Office, which issued a decision
that the claims of the asserted patent are not valid. That appeal remains pending.
Antitrust Litigation
In March 2023, we entered into a stock transfer agreement with JUUL pursuant to which, among other things, we transferred to JUUL
all of our beneficially owned JUUL equity securities. See Note 7. Investments in Equity Securities for a discussion of our disposition of
our investment in JUUL.
In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that our 35% investment in JUUL and the
associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act of 1890
(“Sherman Act”) and Section 5 of the Federal Trade Commission Act of 1914, and substantially lessened competition in violation of
Section 7 of the Clayton Antitrust Act (“Clayton Act”). In February 2022, the administrative law judge dismissed the FTC’s complaint
and, also in February 2022, FTC complaint counsel appealed the administrative law judge’s decision to the FTC. In March 2023,
following our disposition of our investment in JUUL, we filed a motion to dismiss the complaint. In June 2023, the FTC dismissed the
action as no longer in the public interest.
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Also as of January 29, 2024, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S. District Court for the
Northern District of California. The lawsuits initially named, in addition to the two companies, certain senior executives and certain
members of the board of directors of both companies as defendants; however, those individuals currently or formerly affiliated with
Altria were later dismissed. In November 2020, these lawsuits were consolidated into three complaints (one on behalf of direct
purchasers, one on behalf of indirect purchasers and one on behalf of indirect resellers). The consolidated lawsuits, as amended, cite the
FTC administrative complaint and allege that Altria and JUUL violated Sections 1, 2 and/or 3 of the Sherman Act and Section 7 of the
Clayton Act and various state antitrust, consumer protection and unjust enrichment laws by restraining trade and/or substantially
lessening competition in the U.S. closed-system electronic cigarette market. Plaintiffs seek various remedies, including treble damages,
attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid and rescission of the transaction. We filed a
motion to dismiss these lawsuits in January 2021. In August 2021, the U.S. District Court for the Northern District of California denied
our motion to dismiss except with respect to plaintiffs’ claims for injunctive and equitable relief. However, plaintiffs were granted the
opportunity to replead such claims by the trial court, which plaintiffs did in September 2021. In January 2022, the trial court ordered
that the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to an arbitration provision in JUUL’s online
purchase agreement. The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs
did in February 2022, substituting four new plaintiffs. In September 2023, the direct-purchaser plaintiffs filed a third amended
consolidated class action complaint, substituting three of the four named plaintiffs. In October 2023, JUUL filed a motion to compel
arbitration as to certain new direct-purchaser plaintiffs and a motion to dismiss the direct-purchaser plaintiffs’ claims for injunctive
relief. Altria joined the motion to dismiss the injunctive relief claims. The trial is set to commence in May 2026.
Shareholder Class Action and Shareholder Derivative Lawsuits
Shareholder Class Action: In the fourth quarter of 2021, we agreed to settle a class action lawsuit brought by purported Altria
shareholders against Altria and certain of our current and former executives and JUUL, its founders and certain of its current and former
executives alleging false and misleading statements and omissions relating to our former investment in JUUL. Pursuant to the
settlement, which was granted final approval by the trial court in March 2022, among other things, (i) all claims asserted against Altria
and the other named defendants were resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii)
Altria agreed to pay the class an aggregate amount of $90 million, which amount included attorneys’ fees. We recorded pre-tax
provisions totaling $90 million in 2021 and, in January 2022, paid $90 million to plaintiffs’ escrow account.
Federal and State Shareholder Derivative Lawsuits: In October 2022, we agreed to settle a series of federal and state derivative cases
brought by Altria shareholders on behalf of themselves and Altria against Altria and certain of our current and former executives and
directors and JUUL, its founders and certain of its current and former executives. The cases related to our former investment in JUUL
and asserted claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty
by the remaining defendants.
Under the terms of the settlement, which became effective in May 2023, among other things, we agreed to provide $100 million in
funding over a five-year period to underage tobacco prevention and cessation programs, which may include positive youth development
programs, led by independent third-party organizations. We expect to begin funding in 2024. In 2022, we recorded pre-tax provisions
totaling $27 million for costs associated with the independent monitoring of our funding commitments and attorneys’ fees. In the first
quarter of 2023, we recorded pre-tax provisions totaling approximately $100 million related to the settlement, and in April 2023, paid
$15 million to plaintiffs’ escrow account for attorneys’ fees.
Certain Other Tobacco-Related Litigation
“Lights/Ultra Lights” Cases and Other Smoking and Health Class Actions: Plaintiffs have sought certification of their cases as class
actions, alleging among other things, that the uses of the terms “Lights” and/or “Ultra Lights” constitute deceptive and unfair trade
practices, common law or statutory fraud, unjust enrichment or breach of warranty, and have sought injunctive and equitable relief,
including restitution and, in certain cases, punitive damages. These class actions have been brought against PM USA and, in certain
instances, Altria or our other subsidiaries, on behalf of individuals who purchased and consumed various brands of cigarettes. Defenses
raised in these cases include lack of misrepresentation, lack of causation, injury and damages, the statute of limitations, non-liability
under state statutory provisions exempting conduct that complies with federal regulatory directives, and the First Amendment. Twenty-
one state courts in 23 “Lights” cases have refused to certify class actions, dismissed class action allegations, reversed prior class
certification decisions or have entered judgment in favor of PM USA. As of January 29, 2024, two “Lights/Ultra Lights” class actions
are pending in U.S. state courts. Neither case is active.
As of January 29, 2024, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing
medical monitoring program on behalf of individuals exposed to ETS and purporting to be brought on behalf of a class of individual
plaintiffs, is pending in a U.S. state court. The case is currently inactive.
UST Litigation: UST and/or its tobacco subsidiaries have been named in a number of individual tobacco and health lawsuits over time.
Plaintiffs’ allegations of liability in these cases have been based on various theories of recovery, such as negligence, strict liability, fraud,
misrepresentation, design defect, failure to warn, breach of implied warranty, addiction and breach of consumer protection statutes.
Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief,
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including disgorgement. Defenses raised in these cases have included lack of causation, assumption of the risk, comparative fault and/or
contributory negligence, and statutes of limitations. As of January 29, 2024, there is no such case pending against UST and/or its
tobacco subsidiaries.
Environmental Regulation
Altria and our former subsidiaries are subject to various federal, state and local laws and regulations concerning the discharge of
materials into the environment, or otherwise related to environmental protection, including, in the United States: the Clean Air Act, the
Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible party. Altria and our
former subsidiaries are involved in several cost recovery/contribution cases subjecting them to potential costs of remediation and natural
resource damages under Superfund or other laws and regulations. We expect to continue to make capital and other expenditures in
connection with environmental laws and regulations.
We provide for expenses associated with environmental remediation obligations on an undiscounted basis when such amounts are
probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change. Other than
those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that we may
undertake in the future. In the opinion of our management, however, compliance with environmental laws and regulations, including the
payment of any remediation costs or damages and the making of related expenditures, has not had a material adverse effect on our
consolidated results of operations, capital expenditures, financial position or cash flows.
Guarantees and Other Similar Matters
In the ordinary course of business, we have agreed to indemnify a limited number of third parties in the event of future litigation. At
December 31, 2023, we (i) had $48 million of unused letters of credit obtained in the ordinary course of business and (ii) were
contingently liable for guarantees related to our own performance, including $19 million for surety bonds recorded on our consolidated
balance sheet. In addition, from time to time, we issue lines of credit to affiliated entities. These items have not had, and are not
expected to have, a significant impact on our liquidity.
Under the terms of a distribution agreement between Altria and PMI (“Distribution Agreement”), entered into as a result of our 2008
spin-off of our former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial part on the
manufacturer. PMI will indemnify Altria and PM USA for liabilities related to tobacco products manufactured by PMI or contract
manufactured for PMI by PM USA, and PM USA will indemnify PMI for liabilities related to tobacco products manufactured by PM
USA, excluding tobacco products contract manufactured for PMI. We do not have a related liability recorded on our consolidated
balance sheet at December 31, 2023 as the fair value of this indemnification is insignificant. PMI has agreed not to seek indemnification
with respect to the IQOS System patent litigation discussed above under IQOS Litigation, excluding the patent infringement case filed
with the U.S. District Court for the Northern District of Georgia.
As part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.
For further discussion of the supplier financing program, see Note 5. Supplier Financing.
PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our $3.0 billion Credit Agreement and
any amounts outstanding under our commercial paper program. For further discussion, see Note 10. Long-Term Debt.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Altria Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Altria Group, Inc. and its subsidiaries (the “Company”) as of
December 31, 2023 and 2022, and the related consolidated statements of earnings, comprehensive earnings, stockholders’ equity
(deficit) and cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as
of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Report of Management On Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in the Report of Management On Internal Control Over Financial Reporting, management has excluded NJOY Holdings,
Inc. from its assessment of internal control over financial reporting as of December 31, 2023 because it was acquired by the Company in
a business combination during 2023. We have also excluded NJOY Holdings, Inc. from our audit of internal control over financial
reporting. NJOY Holdings, Inc. is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s
assessment and our audit of internal control over financial reporting each represent less than 1% of the related consolidated financial
statement amounts as of and for the year ended December 31, 2023.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Tobacco and Health Litigation
As described in Note 19 to the consolidated financial statements, legal proceedings covering a wide range of matters are pending or
threatened in various U.S. and foreign jurisdictions against the Company as well as its respective indemnitees. The Company records
provisions in the consolidated financial statements for pending litigation when management determines that an unfavorable outcome is
probable and the amount of the loss can be reasonably estimated. The Company’s most significant category of legal proceedings is
tobacco and health litigation. The Company’s accrued liability for tobacco and health litigation makes up a significant portion of the
tobacco and health and certain other litigation items liability of $346 million as of December 31, 2023. While it is reasonably possible
that an unfavorable outcome in a case may occur, except for those cases which have been accrued for: (i) management has concluded
that it is not probable that a loss has been incurred in any of the pending tobacco and health related cases; (ii) management is unable to
estimate the possible loss or range of loss that could result from an unfavorable outcome in any of the pending tobacco and health related
cases; and (iii) accordingly, management has not provided any amounts in the consolidated financial statements for unfavorable
outcomes, if any.
The principal considerations for our determination that performing procedures relating to tobacco and health litigation is a critical audit
matter are (i) the significant judgment by management when determining if a loss for tobacco and health litigation should be recorded in
the consolidated financial statements and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and
evaluating audit evidence related to management’s determination of whether a loss should be recorded.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on
the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s loss
determination for tobacco and health litigation matters and controls over the related financial statement disclosures. These procedures
also included, among others, (i) evaluating the completeness of the Company’s description of tobacco and health litigation matters; (ii)
confirming with external and internal legal counsel the likelihood of an unfavorable outcome and the extent to which a loss is estimable;
(iii) evaluating the reasonableness of management’s determination regarding the likelihood of an unfavorable outcome; and (iv)
evaluating the sufficiency of the Company’s tobacco and health litigation disclosures.
Skoal Trademark Impairment Assessment
As described in Notes 2 and 6 to the consolidated financial statements, the Company’s Skoal trademark had a carrying value of $3.9
billion as of December 31, 2023. Management conducts an annual review of indefinite-lived intangible assets for potential impairment,
and more frequently if an event occurs or circumstances change that would require management to perform an interim review. During
2023, management’s annual impairment test of indefinite-lived intangible assets resulted in no impairment charges. As disclosed by
management, the Company uses an income approach to estimate the fair values of its indefinite-lived intangible assets. The income
approach reflects the discounting of expected future cash flows to their present value at a rate of return that incorporates the risk-free rate
for use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. In performing the
2023 valuation, management’s cash flow analysis for the Skoal trademark included significant judgments and assumptions related to
volume, revenue, income, perpetual growth rate and discount rate.
The principal considerations for our determination that performing procedures relating to the Skoal trademark impairment assessment is
a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Skoal trademark;
(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant
assumptions related to revenue, perpetual growth rate, and the discount rate; and (iii) the audit effort involved the use of professionals
with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on
the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
indefinite-lived intangible asset impairment assessments, including controls over the valuation of the Company’s Skoal trademark.
These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Skoal
trademark; (ii) evaluating the appropriateness of the income approach used by management; (iii) testing the completeness and accuracy
of underlying data used in the income approach; and (iv) evaluating the reasonableness of the significant assumptions used by
management related to revenue, perpetual growth rate, and the discount rate. Evaluating management’s assumptions related to revenue
and perpetual growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current
and past performance of the Skoal brand; (ii) the consistency with external market and industry data; and (iii) whether these assumptions
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were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to
assist in evaluating (i) the appropriateness of the Company’s income approach; and (ii) the reasonableness of the discount rate
assumption.
Acquisition of NJOY Holdings, Inc. – Valuation of Developed Technology
As described in Notes 1 and 3 to the consolidated financial statements, the Company completed the acquisition of NJOY Holdings, Inc.
(“NJOY”) on June 1, 2023 for total consideration of $2.9 billion. Of the acquired intangible assets, $1 billion of developed technology
was recorded. Management determined the preliminary fair value of the developed technology intangible asset using an income
approach. The significant assumptions used by management in determining the preliminary fair value of the developed technology
intangible asset included volume growth rates, operating margins, the assessment of acquired technology life cycles, the discount rate, as
well as other factors.
The principal considerations for our determination that performing procedures relating to the valuation of developed technology acquired
in the acquisition of NJOY is a critical audit matter are (i) the significant judgment by management when developing the preliminary fair
value estimate of the developed technology acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating management’s significant assumptions related to volume growth rates, operating margins, the assessment of
acquired technology life cycles, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill
and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with performing our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition
accounting, including controls over management’s valuation of the acquired developed technology. These procedures also included,
among others (i) reading the purchase agreement and vouching the cash paid for the acquisition; (ii) testing management’s process for
developing the preliminary fair value estimate of developed technology acquired; (iii) evaluating the appropriateness of the income
approach used by management; (iv) testing the completeness and accuracy of the underlying data used in the income approach; and (v)
evaluating the reasonableness of the significant assumptions used by management related to the volume growth rates, operating margins,
the assessment of the acquired technology life cycles, and the discount rate. Evaluating management’s assumptions related to the
volume growth rates and operating margins involved considering (i) the current and past performance of the NJOY business; (ii) the
consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other
areas of the audit. Professionals with specialized skills and knowledge were used to assist in evaluating (i) the appropriateness of the
income approach utilized by management; and (ii) the reasonableness of the acquired technology life cycles and the discount rate
assumptions.
/s/ PricewaterhouseCoopers LLP
Richmond, Virginia
February 1, 2024
We have served as the Company’s auditor since at least 1934, which is when the Company became subject to SEC reporting
requirements. We have not been able to determine the specific year we began serving as auditor of the Company.
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Report of Management On Internal Control Over Financial Reporting
Management of Altria Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Altria Group, Inc.’s internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America. Internal control over financial reporting includes those written policies and procedures that:
n pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of Altria Group, Inc.;
n provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America;
n provide reasonable assurance that receipts and expenditures of Altria Group, Inc. are being made only in accordance with the
authorization of management and directors of Altria Group, Inc.; and
n provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that
could have a material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to
correct deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Altria Group, Inc.’s internal control over financial reporting as of December 31, 2023.
Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Management’s assessment included an evaluation of the design of Altria Group, Inc.’s internal control over financial reporting and
testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its
assessment with the Audit Committee of Altria Group, Inc.’s Board of Directors.
Based on this assessment, management determined that, as of December 31, 2023, Altria Group, Inc. maintained effective internal
control over financial reporting.
Management of Altria Group, Inc. excluded NJOY Holdings, Inc., a wholly owned subsidiary, from its assessment of internal control
over financial reporting as of December 31, 2023, because it was acquired by Altria Group, Inc. in a business combination during 2023.
NJOY Holdings, Inc.’s total assets and total revenues each represent less than 1% of the related consolidated financial statement
amounts as of and for the year ended December 31, 2023.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial
statements of Altria Group, Inc. included in this report, has audited the effectiveness of Altria Group, Inc.’s internal control over
financial reporting as of December 31, 2023, as stated in their report herein.
February 1, 2024
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this Form 10-K. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Report of Independent Registered Public Accounting Firm and the Report of Management on Internal Control over Financial
Reporting are included in Item 8.
Item 9B. Other Information.
During the quarter ended December 31, 2023, none of our directors or officers adopted, modified or terminated any “Rule 10b5-1
trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Part III
Except for the information relating to the executive officers set forth in Item 10, the information called for by Items 10-14 is hereby
incorporated by reference to our definitive proxy statement for use in connection with our Annual Meeting of Shareholders to be held on
May 16, 2024 that is expected to be filed with the SEC on or about April 4, 2024 (“proxy statement”), and, except as indicated therein,
made a part hereof.
Item 10. Directors, Executive Officers and Corporate Governance.
Refer to “Board and Governance Matters - Proposal 1 - Election of Directors” and “Board and Governance Matters - Board and
Committee Governance” sections of the proxy statement.
Information about Our Executive Officers as of February 15, 2024:
Name
Jody L. Begley
Daniel J. Bryant
Office
Executive Vice President and Chief Operating Officer
Vice President and Treasurer
Steven D’Ambrosia
Murray R. Garnick
Vice President and Controller
Executive Vice President and General Counsel
William F. Gifford, Jr.
Chief Executive Officer
Salvatore Mancuso
Heather A. Newman
W. Hildebrandt Surgner, Jr. Vice President, Corporate Secretary and Associate General Counsel
Charles N. Whitaker
Executive Vice President and Chief Financial Officer
Senior Vice President, Chief Strategy & Growth Officer
Senior Vice President, Chief Human Resources Officer and Chief Compliance Officer
Age
52
54
57
64
53
58
46
58
57
All of the above-mentioned executive officers have been employed by Altria or our subsidiaries in various capacities during the past five
years.
As previously announced, Mr. Garnick will retire as Executive Vice President and General Counsel, effective April 1, 2024. Robert A.
McCarter III (age 51) was elected to become Executive Vice President and General Counsel upon Mr. Garnick’s retirement. Mr.
McCarter currently serves as Senior Vice President and Associate General Counsel, ALCS, a position he has held since November 2020.
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103
Prior to this role, he served as Vice President and Associate General Counsel, ALCS, from July 2015 through October 2020. Mr.
McCarter has been continuously employed by ALCS in legal positions since 2015.
Mr. Whitaker’s wife and Mr. Surgner’s wife are first cousins.
Codes of Conduct and Corporate Governance
We have adopted the Altria Code of Conduct for Compliance and Integrity, which complies with requirements set forth in Item 406 of
Regulation S-K. This Code of Conduct applies to all of our employees, including our principal executive officer, principal financial
officer, principal accounting officer or controller, and persons performing similar functions. We have also adopted a code of business
conduct and ethics that applies to the members of our Board of Directors. These documents are available free of charge on our website
at www.altria.com.
Any waiver granted by us to our principal executive officer, principal financial officer or controller under the Code of Conduct, and
certain amendments to the Code of Conduct, will be disclosed on our website at www.altria.com within the time period required by
applicable rules.
In addition, we have adopted corporate governance guidelines and charters for our Audit, Compensation and Nominating, Corporate
Governance and Social Responsibility Committees and the other committees of our Board of Directors. All of these documents are
available free of charge on our website at www.altria.com.
The information on our websites is not, and shall not be deemed to be, a part of this Form 10-K or incorporated into any other filings we
make with the SEC.
Item 11. Executive Compensation.
Refer to “Executive Compensation,” and “Board and Governance Matters - Director Compensation” sections of our proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The number of shares to be issued upon exercise or vesting and the number of shares remaining available for future issuance under our
equity compensation plans at December 31, 2023, were as follows:
Equity compensation plans approved by shareholders (1)
Number of Shares
to be Issued upon
Exercise of
Outstanding
Options and Vesting of
Deferred Stock
(a)
4,400,304 (2)
Weighted Average
Exercise Price of
Outstanding
Options
(b)
$—
Number of Shares
Remaining Available for
Future Issuance Under Equity
Compensation
Plans
(c)
21,022,161 (3)
(1) Our shareholders have approved the following plans, shares of which are referenced in column (a) or column (c): the 2015 Performance Incentive
Plan, the 2020 Performance Incentive Plan and the 2015 Stock Compensation Plan for Non-Employee Directors.
(2) Represents 3,472,801 shares of restricted stock units and 927,503 shares that may be issued upon vesting of performance stock units if maximum
performance measures are achieved.
(3) Includes 20,432,234 shares available under the 2020 Performance Incentive Plan and 589,927 shares available under the 2015 Stock Compensation
Plan for Non-Employee Directors, and excludes shares reflected in column (a).
Refer to “Ownership of Equity Securities of Altria - Directors, Nominees and Executive Officers” and “Ownership of Equity Securities
of Altria - Certain Other Beneficial Owners” sections of our proxy statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Refer to “Related Person Transactions, Director Code and Code of Conduct” and “Board and Governance Matters - Altria Board of
Directors - Director Independence Determinations” sections of our proxy statement.
Item 14. Principal Accounting Fees and Services.
Refer to “Audit Committee Matters - Independent Registered Public Accounting Firm’s Fees” and “Audit Committee Matters - Pre-
Approval Policy” sections of our proxy statement.
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Part IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Index to Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 2023 and 2022
Consolidated Statements of Earnings for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Report of Management on Internal Control Over Financial Reporting
Page
50
52
53
54
56
57
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102
Schedules have been omitted either because such schedules are not required or are not applicable.
In accordance with Regulation S-X Rule 3-09, the audited financial statements of ABI for the year ended December 31, 2023 will be
filed by amendment within six months after ABI’s year ended December 31, 2023.
(b) The following exhibits are filed as part of this Form 10-K:
2.1
2.2
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Distribution Agreement by and between Altria Group, Inc. and Kraft Foods Inc. (now known as Mondelēz
International, Inc.), dated as of January 31, 2007. Incorporated by reference to Altria Group, Inc.’s Current Report on
Form 8-K filed on January 31, 2007 (File No. 1-08940).
Distribution Agreement by and between Altria Group, Inc. and Philip Morris International Inc., dated as of January 30,
2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on January 30, 2008 (File
No. 1-08940).
Articles of Amendment to the Restated Articles of Incorporation of Altria Group, Inc. and Restated Articles of
Incorporation of Altria Group, Inc. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 1-08940).
Amended and Restated By-Laws of Altria Group, Inc. (effective as of October 26, 2022). Incorporated by reference to
Altria Group, Inc.’s Current Report on Form 8-K filed on October 27, 2022 (File No. 1-08940).
Description of Altria Group, Inc.’s Registered Securities. Incorporated by reference to Altria Group, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2022 (File No. 1-08940).
Indenture between Altria Group, Inc. and The Bank of New York (as successor in interest to JPMorgan Chase Bank,
formerly known as The Chase Manhattan Bank), as Trustee, dated as of December 2, 1996. Incorporated by reference
to Altria Group, Inc.’s Registration Statement on Form S-3/A filed on January 29, 1998 (No. 333-35143).
First Supplemental Indenture to Indenture, dated as of December 2, 1996, between Altria Group, Inc. and The Bank of
New York (as successor in interest to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as
Trustee, dated as of February 13, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K
filed on February 15, 2008 (File No. 1-08940).
Indenture among Altria Group, Inc., as Issuer, Philip Morris USA Inc., as Guarantor, and Deutsche Bank Trust
Company Americas, as Trustee, dated as of November 4, 2008. Incorporated by reference to Altria Group, Inc.’s
Registration Statement on Form S-3 filed on November 4, 2008 (No. 333-155009).
The Registrant agrees to furnish copies of any instruments defining the rights of holders of long-term debt of the
Registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the Registrant and its
consolidated subsidiaries to the Commission upon request.
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105
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
Comprehensive Settlement Agreement and Release related to settlement of Mississippi health care cost recovery
action, dated as of October 17, 1997. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 1-08940).
Settlement Agreement related to settlement of Florida health care cost recovery action, dated August 25, 1997.
Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on September 3, 1997 (File No.
1-08940).
Comprehensive Settlement Agreement and Release related to settlement of Texas health care cost recovery action,
dated as of January 16, 1998. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on
January 28, 1998 (File No. 1-08940).
Settlement Agreement and Stipulation for Entry of Judgment regarding the claims of the State of Minnesota, dated as
of May 8, 1998. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended
March 31, 1998 (File No. 1-08940).
Settlement Agreement and Release regarding the claims of Blue Cross and Blue Shield of Minnesota, dated as of May
8, 1998. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended March
31, 1998 (File No. 1-08940).
Stipulation of Amendment to Settlement Agreement and For Entry of Agreed Order regarding the settlement of the
Mississippi health care cost recovery action, dated as of July 2, 1998. Incorporated by reference to Altria Group, Inc.’s
Quarterly Report on Form 10-Q for the period ended June 30, 1998 (File No. 1-08940).
Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree regarding the settlement of the
Texas health care cost recovery action, dated as of July 24, 1998. Incorporated by reference to Altria Group, Inc.’s
Quarterly Report on Form 10-Q for the period ended June 30, 1998 (File No. 1-08940).
Stipulation of Amendment to Settlement Agreement and For Entry of Consent Decree regarding the settlement of the
Florida health care cost recovery action, dated as of September 11, 1998. Incorporated by reference to Altria Group,
Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 1998 (File No. 1-08940).
Master Settlement Agreement relating to state health care cost recovery and other claims, dated as of November 23,
1998. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on November 25, 1998, as
amended by Form 8-K/A filed on December 24, 1998 (File No. 1-08940).
Stipulation and Agreed Order Regarding Stay of Execution Pending Review and Related Matters, dated as of May 7,
2001. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on May 8, 2001 (File No.
1-08940).
Term Sheet effective December 17, 2012, between Philip Morris USA Inc., the other participating manufacturers, and
various states and territories for settlement of the 2003 - 2012 Non-Participating Manufacturer Adjustment with those
states. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on December 18, 2012 (File
No. 1-08940).
Intellectual Property Agreement by and between Philip Morris International Inc. and Philip Morris USA Inc., dated as
of January 1, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 28,
2008 (File No. 1-08940).
5-Year Revolving Credit Agreement, dated as of October 24, 2023, among Altria Group, Inc., JPMorgan Chase Bank,
N.A. and Citibank, N.A., as administrative agents, and the lenders named therein. Incorporated by reference to Altria
Group, Inc.’s Current Report on Form 8-K filed on October 25, 2023 (File No. 1-08940).
Guarantee made by Philip Morris USA Inc. in favor of the lenders party to the 5-Year Revolving Credit Agreement,
dated as of October 24, 2023, among Altria Group, Inc., the lenders named therein and JPMorgan Chase Bank, N.A.
and Citibank, N.A., as administrative agents, dated as of October 24, 2023. Incorporated by reference to Altria Group,
Inc.’s Current Report on Form 8-K filed on October 25, 2023 (File No. 1-08940).
Benefit Equalization Plan, effective September 2, 1974, as amended. Incorporated by reference to Altria Group, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 1-08940).*
Amendment to Benefit Equalization Plan, effective March 31, 2016. Incorporated by reference to Altria Group, Inc.’s
Quarterly Report on Form 10-Q for the period ended March 31, 2016 (File No. 1-08940).*
Amendment to Benefit Equalization Plan, effective January 1, 2016 and October 1, 2016. Incorporated by reference to
Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-08940).*
Amendment to Benefit Equalization Plan, effective January 1, 2019. Incorporated by reference to Altria Group, Inc.’s
Annual Report on Form 10-K for year ended December 31, 2018 (File No. 1-08940).*
106
106
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
Form of Employee Grantor Trust Enrollment Agreement. Incorporated by reference to Altria Group, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 1995 (File No. 1-08940).*
Long-Term Disability Benefit Equalization Plan, effective as of January 1, 1989, as amended. Incorporated by
reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 (File No.
1-08940).*
Deferred Fee Plan for Non-Employee Directors, as amended and restated effective October 28, 2015. Incorporated by
reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No.
1-08940).*
2015 Stock Compensation Plan for Non-Employee Directors, as amended and restated effective October 26, 2022.
Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30,
2022 (File No. 1-08940).*
2015 Performance Incentive Plan, effective on May 1, 2015. Incorporated by reference to Altria Group, Inc.’s
definitive proxy statement on Schedule 14A filed on April 9, 2015 (File No. 1-08940).*
2020 Performance Incentive Plan. Incorporated by reference to Exhibit A to Altria Group, Inc.'s Definitive Proxy
Statement on Schedule 14A filed on April 2, 2020, as amended by Altria Group, Inc.'s Supplement to Proxy Statement
on Schedule 14A filed on April 17, 2020 (File No. 1-08940).*
Form of Indemnity Agreement. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on
October 30, 2006 (File No. 1-08940).
Form of Restricted Stock Unit Agreement, dated as of February 26, 2019. Incorporated by reference to Altria Group,
Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2019 (File No. 1-08940).*
Form of Performance Stock Unit Agreement, dated as of February 26, 2019. Incorporated by reference to Altria
Group, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2019 (File No. 1-08940).*
Form of Restricted Stock Unit Agreement (2020). Incorporated by reference to Altria Group, Inc.’s Quarterly Report
on Form 10-Q for the period ended March 31, 2020 (File No. 1-08940).*
Form of Performance Stock Unit Agreement (2020). Incorporated by reference to Altria Group, Inc.’s Quarterly
Report on Form 10-Q for the period ended March 31, 2020 (File No. 1-08940).*
Form of Restricted Stock Unit Agreement (2021). Incorporated by reference to Altria Group, Inc.’s Quarterly Report
on Form 10-Q for the period ended March 31, 2021 (File No. 1-08940).*
Form of Performance Stock Unit Agreement (2021). Incorporated by reference to Altria Group, Inc.’s Quarterly
Report on Form 10-Q for the period ended March 31, 2021 (File No. 1-08940).*
Form of Restricted Stock Unit Agreement (2022). Incorporated by reference to Altria Group, Inc.’s Quarterly Report
on Form 10-Q for the period ended March 31, 2022 (File No. 1-08940).*
Form of Performance Stock Unit Agreement (2022). Incorporated by reference to Altria Group, Inc.’s Quarterly
Report on Form 10-Q for the period ended March 31, 2022 (File No. 1-08940).*
Form of Restricted Stock Unit Agreement (2023). Incorporated by reference to Altria Group, Inc.’s Quarterly Report
on Form 10-Q for the period ended March 31, 2023 (File No. 1-08940).*
Form of Performance Stock Unit Agreement (2023). Incorporated by reference to Altria Group, Inc.’s Quarterly
Report on Form 10-Q for the period ended March 31, 2023 (File No. 1-08940).*
Form of Executive Confidentiality and Non-Competition Agreement (October 2018). Incorporated by reference to
Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-08940).*
Form of Confidentiality and Non-Competition Agreement (February 2019). Incorporated by reference to Altria Group,
Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2019 (File No. 1-08940).*
Form of Letter Regarding Reimbursement of Legal Expenses. Incorporated by reference to Altria Group, Inc.’s
Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 1-08940).*
Time Sharing Agreement between Altria Client Services LLC and William F. Gifford, Jr., dated February 23, 2023.
Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022
(File No. 1-08940).*
Form of Agreement and General Release (September 2019). Incorporated by reference to Altria Group, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2019 (File No. 1-08940).*
107
107
21
22
23
24
31.1
31.2
32.1
32.2
97.1
99.1
99.2
Subsidiaries of Altria Group, Inc.
Guarantor Subsidiary of the Registrant.
Consent of independent registered public accounting firm.
Powers of attorney.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Altria Group, Inc. Dodd-Frank Compensation Recoupment Policy.
Certain Litigation Matters.
Trial Schedule for Certain Cases.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.
Item 16. Form 10-K Summary.
None.
108
108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALTRIA GROUP, INC.
By:
/s/ WILLIAM F. GIFFORD, JR.
(William F. Gifford, Jr.
Chief Executive Officer)
Date: February 27, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated:
Signature
Title
Date
Director and Chief Executive Officer
February 27, 2024
Executive Vice President and Chief Financial Officer
February 27, 2024
Vice President and Controller
February 27, 2024
Directors
/s/ WILLIAM F. GIFFORD, JR.
(William F. Gifford, Jr.)
/s/ SALVATORE MANCUSO
(Salvatore Mancuso)
/s/ STEVEN D’AMBROSIA
(Steven D’Ambrosia)
* IAN L.T. CLARKE,
MARJORIE M. CONNELLY,
R. MATT DAVIS,
DEBRA J. KELLY-ENNIS,
KATHRYN B. MCQUADE,
GEORGE MUÑOZ,
NABIL Y. SAKKAB,
VIRGINIA E. SHANKS,
ELLEN R. STRAHLMAN,
M. MAX YZAGUIRRE
* By:
/s/ WILLIAM F. GIFFORD, JR.
(WILLIAM F. GIFFORD, JR.
ATTORNEY-IN-FACT)
February 27, 2024
109
109
THIS PAGE LEFT INTENTIONALLY BLANK
110
n S H A R E H O L D E R I N F O R M A T I O N n
Shareholder Response Center:
Computershare Trust Company,
N.A. (Computershare), our transfer
Direct Stock Purchase and
Dividend Reinvestment Plan:
Altria offers a Direct Stock
Internet Access Helps
Reduce Costs:
As a convenience to shareholders
2024 Annual Meeting:
The Altria Annual Meeting of
Shareholders will be held at
agent, will be happy to answer
Purchase and Dividend
and an important cost-reduction
9:00 a.m. (Eastern Time) on
questions about your accounts,
Reinvestment Plan, administered
and environmentally friendly
Thursday, May 16, 2024. For more
certificates, dividends or the
by Computershare. For more
measure, you can register to
information about the Annual
Direct Stock Purchase and
information, please contact
receive future shareholder
Meeting, please refer to Altria’s
Dividend Reinvestment Plan.
Computershare.
materials (i.e., Annual Report and
2024 Proxy Statement or call:
Within the U.S. and Canada,
shareholders may call toll-free:
1-800-442-0077
Shareholder Publications:
Altria makes a variety of publica-
tions and reports available. These
Proxy Statement) electronically.
1-804-484-8838
Shareholders also can vote their
proxies electronically.
Transfer Agent and Registrar:
Computershare Trust
From outside the U.S. or Canada,
shareholders may call:
1-781-575-3572
Postal address:
Computershare Trust
Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
include the Annual Report, news
For more information, please visit
Company, N.A.
releases and other publications.
our website at:
P.O. Box 43078
For copies, please visit our web-
www.altria.com/investors
Providence, RI 02940-3078
site at: www.altria.com/investors
Altria makes available free of
Additional Information:
The information on the respec-
Independent Auditors:
PricewaterhouseCoopers LLP
charge its filings with the U.S.
tive websites of Altria and its
1021 E. Cary Street, Suite 1250
Securities and Exchange
subsidiaries is not, and shall not
Richmond, VA 23219-4058
Commission (SEC), such as Proxy
be deemed to be, a part of this
Statements and Reports on Form
report or incorporated into any
Stock Exchange Listing:
The principal stock
exchange on which
Altria’s common
stock (par value
$0.33 per share) is listed is the
1⁄3
New York Stock Exchange (ticker
symbol: MO). At February 15, 2024,
there were approximately 48,000
holders of record of Altria’s
common stock.
Independent Chair of the Board
Kathryn B. McQuade
Committees
1 Member of Audit Committee,
Marjorie M. Connelly, Chair
2 Member of Compensation and
Talent Development Committee,
George Muñoz, Chair
3 Member of Executive Committee,
Kathryn B. McQuade, Chair
4 Member of Finance Committee,
Virginia E. Shanks, Chair
5 Member of Innovation Committee,
Nabil Y. Sakkab, Chair
6 Member of Nominating,
Corporate Governance and
Social Responsibility Committee,
Debra J. Kelly-Ennis, Chair
To eliminate duplicate mailings,
10-K, 10-Q and 8-K.
please contact Computershare
(if you are a registered sharehold-
er) or your broker (if you hold your
shares through a brokerage firm).
For copies, please visit our
website at:
www.altria.com/SECfilings
If you do not have Internet
access, you may call:
1-804-484-8222
filings Altria makes with the SEC.
Trademarks and service marks
in this report are the registered
property of or licensed by Altria or
its subsidiaries.
n B O A R D O F D I R E C T O R S n
Ian L.T. Clarke 1,4,6
Retired Chief Financial Officer,
William F. Gifford, Jr.3
Chief Executive Officer,
Greater Toronto Airports
Altria Group, Inc.
Authority
Director since 2022
Marjorie M. Connelly1,2,3,6
Retired Chief Operating Officer,
Director since 2020
Debra J. Kelly-Ennis1,3,5,6
Retired President and
Chief Executive Officer,
Convergys Corporation
Diageo Canada, Inc.
Director since 2021
Director since 2013
R. Matt Davis 2,5,6
Retired President, North America,
Kathryn B. McQuade 2,3,4
Retired Executive Vice President
and Senior Vice President,
and Chief Financial Officer,
Global Corporate Affairs,
Canadian Pacific Railway
Dow Inc.
Limited
President, Driftwood
Director since 2012
Leadership, LLC
Director since 2021
George Muñoz 1,2,3,4
Principal, Muñoz Investment
Banking Group, LLC
Partner, Tobin & Muñoz
Director since 2004
Nabil Y. Sakkab 3,4,5,6
Retired Senior Vice President,
Corporate Research and
Development, The Procter
& Gamble Company
Director since 2008
Virginia E. Shanks 2,3,4,5
Retired Executive Vice President
and Chief Administrative Officer,
Pinnacle Entertainment, Inc.
Director since 2017
Ellen R. Strahlman1,5,6
Retired Executive Vice President,
Research & Development and
Chief Medical Officer, Becton,
Dickinson and Company
Director since 2020
M. Max Yzaguirre 2,4,6
Retired Executive Chairman,
Forbes Bros. Holdings, Ltd.
Director since 2022
Design: Andra Hoffman | andradesignstudio.com
Photography: Andy Lilien, Casey Templeton
Printer: DG3 | Diversified Global Graphics Group
© Copyright 2024 Altria
2023
Altria Group, Inc.
Annual Report
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Altria Group, Inc. | 6601 W. Broad Street | Richmond, VA 23230-1723 | altria.com
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